BBG Flagging ’23 Debt Brake Suspension Applies Light Pressure, Futures Hit Fresh Session Lows

Fresh session lows for Bund futures on the back of BBG source reports flagging that Germany will suspend the debt brake for '23 after the well-documented fiscal court ruling produced meaningful questions on the German fiscal front.

• While some form of workaround was expected for the current year, it is the ’24 fiscal situation and beyond that is creating the biggest headaches, with issues only magnified by different political wants within the ruling coalition. This medium-term uncertainty is probably limiting the move.
• German Finance Minister Linder is reportedly set to make the announcement at 16:00 local time (15:00 London), per the same sources.
• Bund futures initially shed ~20 ticks on the move, registering fresh session lows in the process 130.60), before recovering to 130.70 or so, printing 50-55 ticks lower on the day at typing.
• Our technical analyst has flagged the Nov 15 low (130.36) as the next meaningful technical support level. The Nov 20 low (130.47) presents intermediate support between prevailing prices and there.
• German cash yields are now 3.0-5.5bp higher on the day, with 10s cheapening the most on the session.
• ASWs tighten on the news, but only move to flat on the day after some early widening.