JGBS: 20s Richen Following MoF Headlines, Futures Little Changed

President Marcelo Rebelo de Sousa will continue meetings with party leaders today as he looks to glean information on how the most stable gov't can be put together following the 18 May legislative elections. The President of the Republic met with the leaders of the centre-right AD-PSD/CDS Coalition, centre-left Socialist Party (PS) and right-wing Chega on 20 May. Today, he will hold talks with the libertarian Liberal Initiative (IL) at 1130CET and the environmentalist LIVRE at 1700CET. 

• PM Luis Montenegro, leader of the AD, is all but guaranteed to remain in office after his alliance won a plurality with 89 seats, up from 80 previously. Still well short of the 116 required for an overall majority in the Assembly of the Republic, he will require backing from other parties to progress his legislative agenda.
• Chega leader Andre Ventura will meet with the president again on 28 May, when final results of the election will be published. The four seats representing Portuguese Overseas (two for Europe, two for rest of the world) are yet to be confirmed. CNN Portugal reports that "everything points" towards victory for Chega in enough of these seats to break the current deadlock with the PS (currently in joint second place on 58 seats each). This would mean that for the first time ever, Chega would sit as the official opposition in the Assembly of the Republic, providing the party with its largest parliamentary platform to challenge the Montenegro gov't.
• It remains to be seen what composition the gov't has, whether a minority AD administration propped up on a bill-by-bill basis, the PS supporting in a confidence and supply agreement, or even a right-wing alliance with Chega are all potential options. 

German ASWs vs. 3-month Euribor are unchanged to +0.3bp, looking through this morning’s bear steepening on the outright bond curve and operating off multi-week lows registered earlier in May.

• Commerzbank note that yesterday’s Dutch government ruling re: the pension fund transition will “bring less demand for core duration, a hedging focus on shorter maturities and more appetite for credit. Most factors argue for ultralong forward disinversion trades and using recoveries during the transition to scale into long-end Bund swap spread shorts”.

• The BTP/Bund spread, while showing a small touch wider, it continues to make an attempt through that Psychological 100.00bps level.
• As noted a Week ago, immediate downside target is at ~97.7bps (September 2021 low).
• And a further Tightening interest through would Open to 90.4bps (February 2021 low).