EM CEEMEA CREDIT: IVN: 1Q25 solid read, supportive for credit

Rabobank suggest that “with Le Pen having done little to move the needle in terms of the perceived cohesiveness of the Eurozone, her current political problems seem unlikely to have much if any impact on a systemic level”. 

• They go on to note that “French 2014 5-Year CDS now matches levels reached in the immediate wake of last year’s shock election announcement. Much of this widening move, however, took place in prior weeks. The reason for the subsequent ascent, in our view, is that the German-led sell-off in rates has prompted a tightening of financial conditions”.
• The conclude by noting that “Le Pen’s travails look currently to be something of a sideshow. The disconnect between French financial conditions and the country’s fundamental outlook is the more important theme for investors to focus on and one which raises the odds of OAT/Bund spread widening. Resonating with this view is a notable nugget of feedback we received during a client visit last week which was from an investor who noted that the back up in German yields would now see them operating with a clear home bias as there is no longer a need to hunt for returns elsewhere. They believe many of their peers would be of a similar view”. 

• Earlier, PM Sir Keir Starmer claimed "Our talks on an economic deal with the US are well advanced."
• Steven Swinford at The Times outlined on X some of the latest details:
  • "Donald Trump's administration decided against signing economic deal with UK because president wants a 'big bang' on tariffs with no exceptions.[...]. Ministers are drawing up plans to protect key industries amid concerns UK will be flooded with cheap goods [...]."
  • "[UK/US deal is] on the table and ready to sign. The focus is on AI and technology. The Digital Services Tax, which hits silicon valley giants, will be dropped and ultimately replaced with a tax with a broader base."
  • "There are concessions on agriculture. Sounds like tariffs on imports of US beef, chicken and other meat will be lowered, but SPS checks - animal welfare and hygiene standards - will not change."

Riksbank's new FX strategic allocation importantly sees an unchanged approach to FX hedging - meaning the Riksbank remain in a "good balance" between contingency planning as well as risk and return.

• Their new FX allocation boosts USD exposure, drops EUR and NOK, maintains GBP and AUD: 70% USD (from 62%) EUR at 17.5% (from 22%), GBP unchanged at 5%, AUD unchanged at 5%, NOK at 2.5% (from 3%)