FOREX: FX OPTION EXPIRY

• MNI: ECB Q1 ENTERPRISE CREDIT STANDARD +3
• MNI: ECB Q1 ENTERPRISE DEMAND -3
• MNI: ECB Q1 HOUSE PURCHASE STANDARDS -7
• MNI: ECB Q1 HOUSE PURCHASE DEMAND +41
• MNI: ECB Q1 CONSUMER CREDIT STANDARDS +3
• MNI: ECB Q1 CONSUMER CREDIT DEMAND +10

The long end of the ASW curve extends the outperformance seen in recent days, spreads vs. 3-month Euribor -2.2bp to +1.7bp.

• The pullback from cycle extremes in Schatz/Buxl ASW spread continues, with legacy short positions in long end ASWS being put under more pressure as the likes of Buxl ASW vs. 3-month Euribor consolidate above pre-“whatever it takes” German fiscal development levels.
• Cross-market cues also eyed after this week’s stabilisation in wider sentiment counters some of last week’s ASW widening.

The Swedish Spring budget bill included SEK11.5bln of expansionary measures (0.2% GDP), as previously announced by Finance Minister Svantesson. 

• The largest measure announced was SEK4.35bnln on “temporarily increasing the subsidy rate for the tax deduction from 30 to 50 percent”. This increase “will apply to renovations paid for from May 12 until the end of the year. The increase is intended to temporarily support the construction industry in the current economic situation. The increase can also help support the economy in general”.
• The Government projects calendar adjusted GDP growth at 2.3% in 2025 (vs 2.2% in the December forecast round) and 2.6% in 2026 (vs 2.7% in the December forecast round). These are slightly more optimistic than the Riksbank March MPR projections of 2.2% in 2025 and 2026, and may not incorporate latest tariff developments.
• The budget deficit is expected at 1.3% in 2025 (in line with Riksbank forecast) and 0.5% in 2026 (vs Riksbank 1.1%).
• On defence, more detailed proposals will be presented later this year in the 2026 budget, and after NATO sets its new defence spending targets. The Government has already said that it will increase defence spending in line with NATO guidelines by 2030, and borrow more to fund such increases.
• The press release notes that “The security situation has continued to deteriorate in Sweden’s neighbourhood and globally. This situation calls for substantial but necessary expenditures to enhance Sweden’s defence capability. Sweden will also continue to support Ukraine for as long as necessary”.