HYBRIDS: Hybrids: Week in Review

President of the European Commission Ursula von der Leyen faces two votes of no confidence on Thursday, 9 October. Voting will take place from ~12:00CET (06:00ET, 11:00BST). One of the motions was put forward by the right-wing populist Patriots for Europe (PfE) group, and another by the far-left The Left group. 

• As was the case in July, neither motion is likely to succeed. In order for a no confidence motion against a Commission to pass, it needs at least a two-thirds majority of those voting, representing at least half of all MEPs. With 719 MEPs in total, this requires 360 MEPs to vote against VdL for a censure motion to pass.
• This threshold cannot be achieved unless sections of the 'moderate' groups, the centre-right European People's Party, centre-left Socialist and Democrats or liberal centrist Renew Europe, vote in numbers against the Commission. None of these groups is willing to formally back motions put forward by the far-left or far-right.
• In the July censure motion, 175 MEPs voted against the Commission, with 360 in favour and 18 abstentions. The remaining 167 MEPs did not vote.
• The 360 MEPs voting in favour represented a decline from the 370 that backed the Commission in the November 2024 censure motion, and from the 401 that voted in VdL for a second term as Commission president in July 2024.
• Another decline in the number of MEPs willing to back the Commission would not be fatal for the VdL Commission, but could further weaken its position amid long-running arguments over the EU's stance on issues as varied as Gaza, trade with the US, immigration, and the green agenda. 

• US TSY 17W AUCTION: NON-COMP BIDS $455 MLN FROM $69.000 BLN TOTAL

ECB monetary policy portfolio holdings declined by E20.4bln in September, to a total of E3,603bln. This was below the 2024 average of E25.9bln per month and the YTD average of E36.1bln per month. Total PSPP holdings were E2,120bln as of the end of September, while PEPP holdings were E1,483bln.

• As of Q1 2025 (using data from the ECB, IMF and Eurostat), the ECB held 38% of outstanding Dutch bonds, the highest proportion across major Eurozone countries (down from 46% in Q4 2022).
• The ECB held just under 33% of outstanding German bonds as of Q1, down from 41% in Q4 2022. The combination of increased German issuance (related to higher defense and infrastructure spending) and ongoing passive QT is expected to continue adding to the free float of German bonds in the coming years. This has underscored some sellside expectations for further underperformance of (particularly long-end) German paper versus swaps going forward.
• The ECB holds a relatively small proportion of French and Italian bonds (~21% and ~20% as of Q1 respectively).
• Consolidated Q2 debt data will be released in the next few weeks, after which we’ll provide an update on the above.
• Passive run-off of EGB holdings remains very gradual, and Executive Board member Schnabel recently noted that "excess liquidity has come down somewhat more slowly than expected as a result of some autonomous factors”. The combination of gradual portfolio run-off, ample excess liquidity and low usage of standard refinancing operations means updates on the ECB’s longer-term structural refinancing operations remains some way off.