GERMANY: Final YouGov MRP Shows GroKo On Course For Majority

Feb-21 09:23

Ahead of the 23 February federal election, the final mass multilevel regression and post-stratification (MRP) opinion poll from YouGov shows the centre-right Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union still on course to emerge as the largest party. With its central scenario of the CDU/CSU on 220 seats and the centre-left Social Democrats (SPD) on 115, this outcome would allow for the formation of a 'grand coalition' (GroKo) with 335 seats in the 630-member Bundestag without the requirement of a third party. 

  • This central scenario would also pave the way for reform to the debt brake. The absence of the pro-business liberal Free Democrats (FDP) and left-wing nationalist Sahra Wagenknecht Alliance (BSW) from parliament removes two known opponents of reform. The nominally pro-reform CDU, SPD, Greens, and Die Linke would hold 484 seats, well over the 420-seat two-thirds threshold.
  • This would allow the constitutional reform to pass if fiscally conservative holdouts in the CDU refuse to back reform, or even in the unlikely scenario the far-left progressive Die Linke sought to block reform on the basis that it could be used to increase German defence spending.
  • The 'risk' scenario in terms of political stability and for debt brake reform is if the far-right Alternative for Germany (AfD), FDP and BSW all hit their 'high' range seat estimates. This would come in at a cumulative 250 seats, enough to form a blocking minority for reform. It would also likely coincide with the CDU and SPD hitting their 'low' range seat totals, requiring a third party to join gov't in a scenario that risks similar coalition ructio as seen in the 2021-24 'traffic light' coalition. 

Chart 1. YouGov MRP Central Seat Projection

2025-02-21 08_44_59-2025-02-21-08-44-48-151003-c531eac6d7f88d4dd894f2284c08d390471478978b19c7a4f6d11

Source: YouGov, MNI. Fieldwork: 7 - 19 February 2025, 9,281 respondents. 

Historical bullets

EQUITIES: Estoxx large Put calendar spread

Jan-22 09:21

SX5E (21st Feb/21s Mar) 4700/4800p calendar, aggressor is the seller at 17.25 in 37.5k.

CROSS ASSET: Lack of FX Reaction Suggests Lagarde Not A Key Driver Of EQ/FI Bid

Jan-22 09:15

President Lagarde’s interview with CNBC did not come across as particularly dovish compared to recent GC commentary or her prior interview with the FT on December 23. Although EUR STIRs have rallied alongside core FI over the past hour, the lack of reaction in EUR FX suggests Lagarde’s views (and ECB monetary policy more generally) have not been a key driver - as noted in earlier commentary.

  • Asked about how appropriate the prospect of four 25bp cuts by the June meeting is, Lagarde did not provide a view: “I leave it to them [other GC colleagues] to sort of anticipate and play that game of, you know, so many, at which pace etc”.
  • Global equity futures have rallied alongside core FI over the past hour, likely factoring into earlier peripheral/semi-core outperformance versus Bunds.
  • Price action here not driven by specific newsflow or headlines, but provides another example of the jumpy short-term nature of markets this week - with the eventful first few days of the Trump administration helping to underpin intraday vol here.
  • Major EGB futures have continued to move away from earlier session highs, with Bunds now +8 ticks at 132.02 (vs an intraday high of 132.22).

GILTS: Cross-Market Cues Dominate, Bearish Trend Intact

Jan-22 09:05

Gilts continue to take cross-market cues, initially rallying alongside EGBs and European equities, before fading back from highs.

  • Futures breached yesterday’s high, peaking at 92.52, but failed to challenge Fibonacci resistance at 92.75. Contract fades back to 92.30 last.
  • The overarching technical setup remains bearish, but the recent recovery poses a risk to that trend.
  • Bears need to force a move through the Jan 16 low (90.68) to assert fresh pressure.
  • Yields little changed to 1bp lower across the curve.