The Internal Revenue Service (IRS) in the US has updated its Tax Withholding Estimator to incorporate changes to credits and deductions under the One, Big, Beautiful Bill (OBBB). In a statement, the IRS said the tool now accounts for provisions including “no tax on tips, no tax on overtime, and other tax benefits”. The IRS Tax Withholding Estimator is a free online tool designed to help workers and retirees estimate how much federal income tax should be withheld from pay cheques now to cover taxes due n ...

Core Insights - The 2025 Reconciliation Legislation, known as the Big, Beautiful Bill (BBB), introduces significant tax changes that will affect middle-class taxpayers, including adjustments to income-tax brackets, deductions, and credits [1] Changes Expected - Middle-class taxpayers may experience local tax changes as states address budget deficits by expanding sales tax bases and increasing sales tax rates [2][3] - The Child Tax Credit will increase to a maximum of $2,200 in 2025, up from $2,000 in 2024, with this increase being permanent into 2026 and beyond [3] - Charitable contributions can now be deducted up to $1,000 for standard deduction taxpayers and $2,000 for married couples filing jointly, a change from previous rules that only allowed itemizers to deduct [3] - A new floor for deducting charitable contributions has been established at 0.5% of the taxpayer's adjusted gross income (AGI), meaning contributions up to this threshold are not deductible for itemizers [3] - Itemizers will see a 300% increase in state and local tax deductions, with a new limit of $40,000 through 2029, up from $10,000 in 2024, benefiting middle-class taxpayers in high tax areas [3] - Several new temporary deductions have been introduced, including deductions for overtime pay, tips, new vehicles manufactured in the U.S., and a $6,000 senior deduction, all set to expire after 2029 [3]

Government Policy - The Biden administration is seen as contributing to a problem [1] - The "Big, Beautiful Bill" is suggested as a potential solution [1]

Investment Rating - The report maintains a positive outlook on Emerging Markets (EM), indicating a favorable investment environment due to the depreciation of the USD and supportive local currency bond flows [1][19]. Core Insights - The depreciation of the USD is expected to continue benefiting EM local debt returns, with significant inflows into EM local currency funds observed recently [1][19]. - The report highlights the importance of upcoming US Treasury auctions as potential indicators for EM performance, particularly in the context of equity and fixed income returns [14][19]. - Structural international positions are not shifting significantly, which is likely to sustain inflows into EM credit and local currency bonds [19][20]. Summary by Sections Emerging Markets Overview - The report discusses the ongoing depreciation of the USD and its implications for EM, suggesting that tariffs-related issues may continue to limit USD strength [1][14]. - Local currency bond flows are expected to be supported by both external and internal factors, with recent performance tracking positively [19]. Asia Focus - In China, the USDCNY is below fixing levels, and upcoming fixings will be crucial for assessing policy bias, with expectations for lower rates from the PBoC [2][32]. - Indonesia is highlighted as a bullish opportunity, with expectations for the IDR to appreciate due to returning portfolio inflows and a favorable economic backdrop [37][38]. - The Philippines is expected to see a gradual decline in yields, with current underperformance likely to be short-lived as supply dynamics improve [42][44]. CEEMEA and LatAm Insights - In Israel, economic fundamentals are becoming more relevant as the conflict nears resolution, with inflation and growth trajectories under scrutiny [3][48]. - Colombia's fiscal rule suspension and labor reform efforts are noted, with macroeconomic data showing resilience despite a cautious outlook on cash positions [3]. - The report maintains a neutral stance on rates in CEEMEA while expressing a positive outlook on duration in Mexico and Brazil [29][30].