GERMANY: CDU & SPD Factions To Hold Meetings Amid Efforts To Get Greens On Board
Both the conservative Christian Democratic Union (CDU) and the centre-left Social Democrats (SPD) have called meetings of their respective parliamentary factions for today. The CDU will meet at 1300CET (0800ET, 1200GMT), while the timing for the SPD meeting is unspecified. The CDU meeting is set to discuss the party's latest offer to the environmentalist Greens as they seek to secure the two-thirds majority required in the Bundestag to get the debt brake reform and infrastructure fund package passed before the new parliament convenes on 25 March. CDU leader Friedrich Merz has cancelled a visit to Munich to remain in Berlin and hold talks with the Greens.
- SZ reports that the CDU has offered the Greens a proposal in which E50bln of the E500bln infrastructure fund would be earmarked for climate protection. In a fractious Bundestag debate on 13 March, the Greens continued to voice opposition to the investment fund, claiming that it would ultimately be used to finance tax cuts rather than boost infrastructure.
- The Greens favour separating the debt brake reform to boost defence spending and infrastructure fund into separate packages, which the SPD has strongly opposed.
- The Bundestag Budget Committee was due to meet at 1130CET (0630ET, 1030GMT), but this has been pushed back to 1700CET (1200ET, 1600GMT). The Budget committee will adopt the resolution on the fiscal package that the full Bundestag will then vote on 18 March.
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GILTS: Bullish Momentum Stalling
Supply-related pressure across wider core global FI markets and spillover from a rally in European equities weighed on gilts at the open, with fresh selling seen in recent trade.
- A downtick in oil has limited the weakness.
- Futures as low as 92.80.
- First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
- Yields 1.5-2.5bp higher across the curve.
- 10-Year spread to Bunds little changed at ~207.5bp.
- Local headline flow has been dominated by NIESR’s higher-for-longer view surrounding the BoE (looking for one cut in both ’25 and ’26, leaving Bank rate at 4.00%) and suggestions surrounding the erosion of the UK’s narrow fiscal headroom (not a new idea)
- GBP1bln of 0.625% 0.625 Mar-45 I/L supply was digested smoothly.
- Modest hawkish adjustments in GBP STIRs seen given the moves in the long end.
- 58.5bp of BoE cuts priced through year-end vs. 60bp early today.
- SONIA futures flat to -2.0.
- Comments from BoE MPC member Greene due this afternoon (15:00 GMT).
- Spill over from U.S. CPI data also eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.407 | -4.7 |
May-25 | 4.211 | -24.3 |
Jun-25 | 4.134 | -32.0 |
Aug-25 | 3.989 | -46.5 |
Sep-25 | 3.953 | -50.1 |
Nov-25 | 3.883 | -57.2 |
Dec-25 | 3.869 | -58.5 |
ITALY DATA: Italy IP Surprisingly Slides But Data Volatility Caveat
Italian December industrial production was weaker than expected falling 3.1% M/M swda (vs -0.2% consensus), after rising 0.3% in November. On a 3m/3m basis, industrial production deteriorated further to -1.1% from -0.7% in November.
- On the month, there were heavy declines across the main categories (consumer goods -3.3%, intermediate goods -3.6% and capital goods -3.3%) whilst energy bounced 1.0% - all on a SWDA basis.
- A reminder though that the underlying data are prone to particularly large swings, which display a heavy seasonal pattern but the magnitude of which can make adjustment difficult: actual NSA production fell -17% M/M compared to the -20% M/M in Dec 2023 whilst the working day adjusted only data saw -19% M/M after -14% M/M in Dec 2023.
- Industrial sentiment in Italy remains weak, with the manufacturing PMI in contractionary territory for 10 consecutive months (46.3 in January). The ISTAT manufacturing confidence series continues to remain below its 2000-2019 average at 86.8 in January (vs 91.0 average).
- 3m/3m production in consumer goods remains positive in December, whilst energy has returned to growth from a slight decline in November. Conversely, 3m/3m intermediate and capital goods production were negative and deteriorated further in December.
- Looking at manufacture of motor vehicles, trailers and semi-trailers specifically fell 3.5% M/M, after rising 0.7% in November. The 3m/3m series has been negative since December 2023, and deteriorated further in December to -12.5% from -11.9% in November.
EURIBOR: EURIBOR FIX - 12/02/25
EURIBOR FIX - EMMI/Bloomberg.
- EUR001W 2.6580 -0.0030
- EUR001M 2.6160 0.0010
- EUR003M 2.5530 0.0140
- EUR006M 2.4860 0.0050
- EUR012M 2.3700 -0.0040
