SPAIN AUCTION RESULTS: Decent Spanish auction, well digested by markets

FAZ reports that there will not be a second round of voting for a new chancellor today following centre-right Christian Democatic Union (CDU) leader Friedrich Merz's unexpected defeat in the first round of voting in the Bundestag a short time ago (see 'GERMANY: Merz Falls Short In First Round Of Chancellor Voting', 0925BST). The next vote has to take place within two weeks, once again with an absolute majority (316 votes) required. Merz won just 310 in the first ballot. Taggespiegel: "... according to an SPD parliamentary group spokesperson, the [second round] election could not take place until Friday at the earliest."

• As Jessica Parker at the BBC notes, "This is so embarrassing for Friedrich Merz. His whole pitch - of being an antidote to the weakness & division of the last govt - has crumbled on day one."
• The election of the chancellor is a secret ballot, meaning it is impossible to know which CDU/CSU or centre-left Social Democrat (SPD) lawmakers voted against Merz. What is clear is that at least five did so. The total seats held by the opposition Greens, Alternative for Germany and Die Linke is 302, while 307 MPs voted against Merz. A total of 620 valid ballots were cast, with one ruled invalid. This means nine lawmakers did not vote.
• Spiegel: "We are assuming full support among us," a [SPD] source says. No one was missing. One member of parliament blames the CDU/CSU: He suspects the dissenters in the CDU and CSU are trying to make the SPD look bad."

Bunds have moved away from session lows in the wake of CDU leader Merz’s failure to be approved as the next Chancellor in the first round of voting (see our political risk team’s recent bullet for greater colour and details on what comes next).

• The move is relatively shallow, with yields now 1bp lower to 1bp higher on the day across the curve. 2-3bp lower than levels that prevailed into the headlines.
• Similarly, ASWs have more than reversed their early tightening, with spreads vs. 3-month Euribor now 0.4-1.1bp wider on the day.
• The bond curve holds steeper ahead of the pricing of today’s 30-Year syndication (also leading to underperformance for the long end on the ASW curve), while there is a modest dovish repricing further forward on the bond curve/STIR strip.
• The moves only reflect a modest reduction in the odds of meaningful fiscal easing being deployed in Germany at this stage.
• More sizeable moves have been seen in equities, with the DAX down over 1% on the day. 

• Size: EUR Benchmark Tap of DBR 2.9% 08/15/56 DBR+3.25 Area (MNI expects E4-6bln)
• Books in excess of E30bln (inc E3.595bln JLM interest)
• Spread set: 2.50% Aug-54 Bund + 2.5bp (mid) (guidance was +3.25bp area)
• Settlement: May 13, 2025 (T+5)
• ISIN: DE000BU2D012
• Bookrunners: Barclays, Citi (B&D), CA-CIB, DZ Bank, GS, JPM. Remaining members of the Bund Issues Auction Group will be invited into the co-lead group
• Timing: Books to close at 10:30BST / 11:30CET

From market source