FRANCE: Bayrou Will Avoid Censure For Now As Far-Right Bides Its Time
The gov't of PM Francois Bayrou is safe from a censure motion set to be put forward by the centre-left Socialist Party (PS) after the far-right Rassemblement National (RN, National Rally) confirmed that it would not vote alongside the parties of the left to remove the PM and his cabinet. Earlier today, RN Vice-President Sebastian Chenu told France Inter that it would wait until the next budget vote to back a censure motion against the PM, saying "The meeting with censure is in the fall, at budget time. Francois Bayrou's turn will come (...) He should take this non-censorship as a real warning,".
- The motion comes after a collapse in negotiations of the so-called 'conclave' comprising the governing parties, the PS, trade unions and employers' associations over possible changes to President Emmanuel Macron's pension reforms, which were pushed through parliament without a vote in 2023.
- Chenu's comments mirror those of RN President Jordan Bardella, who said "the budget will be the moment of truth" this autumn, adding that "given the way things are going, the government will not last very long."
- With the first anniversary of the snap legislative elections approaching in early July, Macron would be in the position to dissolve the National Assembly and call a new set of elections.
- Bayrou's approval ratings have tanked in recent months amid wrangling over the pension reforms and alleged mishandling of a child abuse scandal at a school in his former district.
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EURIBOR OPTIONS: ERQ5 98.31/43 1x1.5 Call Spread Lifted
ERQ5 98.31/43 1x1.5 call spread paper paid 1.25 on 10K.
ITALY AUCTION PREVIEW: Minimum Coupon and ISIN Announced For BTP Italia
The MEF has announced that the guaranteed minimum annual (real) coupon for the new 7-year BTP Italia, maturing 4 June 2032, will be 1.85%.
- "The definitive annual (real) coupon rate will be communicated at the opening of the fourth day of the placement period, Friday the 30th of May, and it will be set above or at the level of the guaranteed minimum annual (real) coupon rate".
- "For the First Phase the ISIN code of the bond is IT0005648248"...."The index number of inflation calculated at the accrual date and settlement date of the bond is 121.39000".
- This will be the first BTP Italia since March 2023 with an offering for retail investors between 27-29 May and for institutional investors on 30 May. As usual, the BTP Italia is linked to Italian inflation (rather than Eurozone inflation). There will also be the usual 1% bonus to retail investors who hold the issue from launch until
maturity. - The last BTP Italia launched in March 2023 had a 5-year maturity and saw E8.563bln sold to retail investors and E1.353bln sold to institutional investors.
- Note also that there is a BTP Italia maturing this week with E18.4bln outstanding. We would expect a decent proportion of this to be rolled into the new issue
EGBS: EU-US Tariff Delay Weighs On Bunds, But Activity Muted By Public Holidays
Bund futures are -26 ticks at 130.39, with volumes unsurprisingly depressed given today’s UK and US public holidays.
- Yesterday evening, US President Trump and EC President von der Leyen agreed to delay the imposition of 50% US tariffs on the EU to July 9 (from June 1 previously). This saw Bunds gap as low as 130.15 at the overnight open. Focus now turns back to negotiations between the two parties.
- Some decent sized block trades in Bobl futures have been noted this morning.
- The German curve has bear flattened with Schatz yields up 3.5bps and 30-year Bund yields up 1bp, as the tariff delay tempers ECB rate cut expectations a little.
- 10-year EGB spreads to Bunds are biased tighter. BTPs find additional light support from Moody’s outlook upgrade on Friday after hours.
- No regional data of note today, with focus on the start of the Eurozone May flash inflation round later this week (France tomorrow; Spain , German and Italy on Friday).
- ECB’s Simkus reiterated that there is space for another rate cut in June. Lagarde and Nagel are scheduled to speak this afternoon.
- This week’s EGB supply kicks off tomorrow with Italy (BTP Short Term/BTPei auction and the launch of the new 7-year BTP Italia) and the Netherlands. A reminder that the upcoming week sees large redemptions (E56.4bln) and coupon payments (E15.1bln), mostly from France.
