EGBS: ECB-Dated OIS Drift Higher Helps Keep Pressure On Pre-ECB
The previously covered upward drift in terminal pricing on the ECB-dated OIS strip keeps EGBs on the defensive pre-meeting, with the Bund curve bear flattening (a theme observed across most of the EGB curves) as 10-Year yields show just above 2.50%, while GGBs and BTPs hold the bulk of their previously covered widening (at the 10-Year point).
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GREECE: Mitsotakis' ND In Pole Position, But PASOK Could Decide Next PM
Polling ahead of the 21 May election shows Prime Minister Kyriakos Mitsotakis' centre-right New Democracy on course to win a plurality of seats, but fall short of an overall majority with around 119-121 out of 300 on offer. With the main opposition leftist SYRIZA set to come in second place with between 94 and 100 seats, the centre-left PASOK (projected 33-36 seats) are likely to emerge as the kingmakers post-election.
- Based on recent polling, ND and PASOK together would likely cross the 151-seat threshold for a majority gov't. However, PASOK leader Nikos Androulakis was a target of a phone spyware scandal that implicated members of the National Intelligence Service, a department directly under the PM's control. As such, a partnership with ND may not prove workable.
- The other option could be a broad leftist coalition with SYRIZA, PASOK, and former finance minister Yanis Varoufakis' anti-austerity MeRA25, propped up from outside by the Communist Party (KKE). However, this could also prove unworkable, with PASOK much more centrist than SYRIZA, let alone MeRA25 and the KKE.
- If it is impossible to form a governing coalition, snap elections could be called. A second election would be held under a reinforced proportional system rather than the current simple proportional system. This would see the largest party awarded an additional 50 seat 'majority bonus', ensuring that it can govern alone.
Chart 1. Seat Projections for General Election Based on Opinion Polling
Source: MRB, Metron Analysis, GPO, Pulse RC, Kapa Research, Marc-Proto Thema, MNI
EURIBOR OPTIONS: ERU3 96.25/96.50/96.75 Call Fly Lifted
ERU3 96.25/96.50/96.75 call fly paper paid 3.75 on 12K all day.
CANADA: GoC Underperformance Continues Ahead Of CAD CPI, US Retail Sales
- GoCs have continued yesterday’s underperformance to Tsys, not quite to the same extent but still notable with a lack of new drivers to spur the move ahead of US retail sales/CAD CPI in just over an hour.
- Largest relative moves are again seen in the front end to belly, with 2YY -1bps vs -3.6bps Tsys and 5YY -1.9bps vs -4bps.
- There is a similar story in early BAX trading, up just +0.005/0.01 on the day up until +0.03 for the Dec’24 vs SOFR trading +0.03 for the Dec’23 and +0.045 for the Dec’24.
- 2023 BAX inversion trades close to recent lows with the BAM3/Z3 time spread -0.315 whilst OIS is in keeping with the BoC's guidance of a pause ahead with less than one cut priced by year-end.
