EU AUTOMOTIVE: Mercedes-Benz (MBGGR A2/A/A): New Issue FV

The weakness in outright bonds/uptick in European equities leaves German ASWs narrower early this week.

• Spreads vs. 3-month Euribor are 0.2-0.9bp narrower on the day, with Schatz leading the narrowing.
• However, the Schatz spread has failed to breach Friday’s low, while longer dated variants have traded through their respective Friday lows.
• Zooming out, a slightly more conducive risk tone has started to counter the widening theme seen in the second half of March/early April.
• A reminder that early March saw fresh cycle lows for long-dated spreads, following the German “whatever it takes” fiscal moment.
• That was before a lack of an immediate ramp up in issuance and the well-documented increase in global trade/U.S. policy uncertainty weighed on wider risk sentiment, helping drag ASWs away from lows.
• The impending, meaningful uptick in German issuance should continue to play into long end ASW spread dynamics over the medium-term (it should move back to the fore in H225/H126), although positioning and swings in broader risk appetite need to be accounted for as well.

SNB adjusts the remuneration of sight deposits, lowering the threshold factor from 20 to 18, effective as of 1st June 2025.

• This is considered neutral for monetary policy purposes, as it offsets increases to minimum reserve requirements.

Full SNB release here.

• What this effectively means is that more sight deposits are remunerated at a discount to the the SNB policy rate (rather than at the policy rate).
• The SNB is conducting this move in order to ensure monpol remains effective and the transmission mechanism isn't hampered by minimum reserve requirements rising (which they're expected to continue to do over the coming three years).
• The move follows recent previous adjustments to reduce the threshold factor that were implemented in October 2024 and February 2025.
• As such, no notable response in EUR/CHF, still below the overnight high of 0.9438.

Euribor futures see a somewhat more durable recovery from session lows than Bunds, with the more sanguine risk environment not enough to meaningfully shift ECB easing expectations. Futures are -0.5 to -2.0 ticks through the blues at typing. 

• ECB-dated OIS price 63bps of easing through year-end, ~1bp more hawkish than yesterday’s close. A 25bp cut is fully priced through June.
• Over the weekend, Reuters sources reported that policymakers are “increasingly confident” about a June cut, but there is “little to no” appetite for a big (i.e. 50bp) move.
• The lack of appetite for a 50bp cut pushes back on some market excitement last week on comments from Rehn and Lane. We wrote at the time that there were caveats to those remarks which limited the dovish readthrough.
• Weekend/morning ECB speak has seen Villeroy, Kazaks, Centeno and Simkus offer support for further rate cuts, while the more hawkish Knot suggests the June decision will be “really complicated”. Rehn and De Guindos are scheduled to speak at 1400BST today.
• This week’s heavy Eurozone data calendar includes flash inflation prints for April and a first look at Q1 GDP across member states. MNI’s inflation preview will be released this afternoon.