FRANCE: Lecornu Gains Ground As Frontrunner To Replace Bayrou
French Prime Minister Francois Bayrou told the French National Assembly that lawmakers can vote ‘according to their conscience’ today in a no-confidence vote that is expected to result in Bayrou's ouster.
- Bayrou reiterated his debt warnings: "If we want to save the ship, the ship on which we and our children find ourselves, we must act without delay. If we do not address the debt, we will no longer be able to borrow at all."
- Boris Vallaud, the president of the socialist bloc, said, “By voting against confidence today, the socialists are taking responsibility for asserting that they are ready, with the left and the ecologists, to govern."
- Next steps: Betting markets lean slightly towards snap legislative elections, despite Macron ruling the option out and the risk of further gains for the far-right National Rally. Defence Minister Sébastien Lecornu is favoured to replace Bayrou if elections are not called.
- Politico notes: "Lecornu has established his credentials as a loyal Macron ally, honing a political style that chimes well that of the president — in particular his engagement with local-level politics."
- If Macron looks left for a PM (after three centrists allies) then Socialist leader Olivier Faure or Former Socialist Party prime minister Bernard Cazeneuve have been floated as potential candidates.
- DW notes, “With no rules governing who Macron must choose, or how quickly, Bayrou is likely to remain prime minister in a caretaker capacity.”
- For a timeline of today's vote, see: FRANCE: Result of No-confidence Vote Not Expected Till 1900CET At The Earliest
Figure 1: Next French Prime Minister
Source: Polymarket
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
