AUSTRALIA: Interal ALP Battle For Ministries Gives PM 1st Headache Of 2nd Term
In the wake of the landslide victory for PM Anthony Albanese and his centre-left Australian Labor Party (ALP) in the 3 May federal election, Guardian Australia reports that internal battles are emerging within various factions of the party ahead of the swearing in of a new ministry as Albanese gets his second term underway. The article claims there is speculation that Minister for Industry and Science Ed Husic, hailing from the New South Wales right faction of the ALP, could be demoted to make way for a figure from the Victorian right faction amid the increased parliamentary intake for the ALP.
- Guardian Australia: "MPs from Victoria and other states believe the NSW right faction is overrepresented, with six places in the ministry. The left is expected to add an extra position, due to its growing presence in the party’s caucus.[...] Labor’s rules dictate that the factions choose members for 20 cabinet positions, with the leader assigning portfolios. Another 10 outer ministry roles and other appointments are also chosen by the leader."
- A caucus meeting of ALP lawmakers is scheduled for Friday, 9 May, while Albanese has confirmed that his new ministry will be sworn in on Tuesday, 13 May.
- The factional battles are unlikely to cause any significant issues for stability within the gov't in the short term, with the resounding win for the ALP meaning Albanese is at the peak of his political powers. Nevertheless, shifts in ministry representation between various state's lawmakers could foster resentment that could lead to personnel problems in the future.
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STIR: Tariffs Pull Near-term ESTR Curve Lower; M/T Curve Still Steeper On Fiscal
With global markets settling after a volatile ~60 minutes of (erroneous) headline-driven trading, ECB implied rates remain off session lows alongside core EGB yields. The 1y1y ESTR swap rate is nonetheless still on track for its lowest close since December 11, 2024, currently at 1.71%. That’s down from a close of 1.90% at last Wednesday's close (i.e. before the "Liberation Day" announcement), and also well below the 1.83% seen on February 28 (i.e. before the German defence/infrastructure announcement).
- The imposition of US tariffs – alongside the policy uncertainty that has built up over the past few months – is expected to weigh on regional demand and therefore contain inflationary pressures in the near-term.
- Additional disinflationary channels stem from the possible diversion of Chinese goods to the EU in response to US tariffs (note: EU officials are currently considering whether to implement measures to protect EU businesses against such dynamics) and a weaker energy price outlook on the back of lower global demand and an unwinding of OPEC+ supply cuts.
- 1- and 2-year EUR inflation swaps are on track to close at their lowest since mid-2021, even as Brent crude and natural gas futures drift away from early lows through the course of today’s session.
- However, on a 3-5-year horizon, the ESTR forward curve still sits steeper than at the end of February. This likely reflects the positive growth and inflation impulse from increased German/EU fiscal spending, possibly alongside the medium-term inflationary impact of tariffs assuming the EU retaliates.
US TSY FUTURES: BLOCK: Jun'25 10Y Sale
- -5,269 TYM5 112-10, sell through 112-11.5 post time bid at 1048:04ET, DV01 $335,000. The 10Y contract trades 112-07 last (-27).
EGBS: Bund Futures More Than Reverse Erroneous Headline-Driven Sell-off
Bund futures have more than reversed the sell-off attributed to an erroneous rumour that US President Trump was considering 3-month delay to tariffs on countries excluding China. That leaves futures -27 ticks lower today at 130.25, having briefly traded as low as 129.11.
- Price action over the past ~45 minutes underscores the highly sensitive nature of global markets to ongoing US tariff developments. Where the tariffs themselves and any retaliation from trading partners ultimately land will be key to central bank and fiscal policy outlooks.
- The 20-day EMA at 129.02 has contained downside in Bund futures intraday, and this level remains a key short-term support.
- On the topside, Friday’s high at 131.48 presents initial resistance.
- The German curve has twist steepened on the session, with Schatz yields down 5.5bps owing to dovish repricing in ECB rate cut expectations. 30-year Bund yields are up 3.5bps, dragged higher by long-end USTs.
- 10-year EGB spreads to Bunds have moved away from earlier highs during the course of the session. The BTP/Bund spread is 5.5bps wider at 124.5bps, dow from a high of over 130bps earlier).
