EU REAL ESTATE: Public Property Invest: 6yr IPT

Japan’s ruling Liberal Democratic Party is considering a ‘full spec’  leadership election on Oct. 4 to elevate a successor to outgoing PM Shigeru Ishiba. The Ishiba government will convene a special parliamentary session to formalise the new government within a few days of the vote.

• Bloomberg notes the election format would give "each of the 295 LDP parliamentary lawmakers one vote each and allocate an equal number of votes to party members. The LDP had 1.03 million members in 2024. That leaves the contenders fighting over 590 ballots."
• Nikkei notes, “If no candidate is able to win a majority, a [FPTP] run-off will be held among the top two candidates... If different candidates are nominated by the two houses, the decision of the lower house prevails.” As the LDP does not control a majority in parliament, there is a remote possibility that a minority coalition could elect a non-LDP candidate via majority vote.
• Polymarket gives pro-reform Agriculture Minister Shinjiro Koizumi a slight edge over conservative Internal Affairs Minister Sanae Takaichi. A third, lower-profile, frontrunning candidate, Chief Cabinet Secretary Yoshimasa Hayashi, receded this morning.
• Nikkei notes that two short-lived PMs have raised concerns of a reversion to 'revolving-door prime ministers', suggesting that political stability will be a key feature of the campaign. An expert told Nikkei that a snap general election in the short term is unlikely, with the new leader likely to hold at least one parliamentary session this autumn before calling an election -- next year at the earliest. 

Figure 1: Next Japanese Prime Minister

Source: Polymarket

EUR STIRs remain focused on Thursday’s ECB decision. Less weak-than-expected French industrial production data had little impact on the space. Although markets continue to price a risk of one more ECB cut this cycle (in line with our policy team’s recent reporting), the forward curve over the next few years is remarkably flat.

• The 1y ESTR rate is 1.84%, while the 1y1y rate is 1.83% at typing. Over the next two years, the opposing forces of higher effective tariff rates and increased German fiscal stimulus will be key in determining whether such a flat curve shape is warranted.
• Further out, we estimate the 4y1y ESTR rate at 2.40%.
• ECB-dated OIS price 17.5bps of easing through July 2026.
• Euribor futures are flat to -2.0 ticks through the blues. Early flow has included a buyer of the 97.50 put calendar spread: ERM6/ERH6 97.50 put calendar, paper pays net 0.5 for the M6 option in 5k. This strategy looks to take advantage of steady ECB rates into Q1 2026, before the risk of hikes becomes more apparent in Q2 onwards.
• Yesterday, we sent out a summary of analyst expectations for the ECB’s September macroeconomic projections, which will likely shape the tone of Thursday’s policy statement and press conference. Overall, analysts don’t expect major revisions, but as always there are a range of estimates. See here and here.
• MNI’s full ECB preview will be released later today. 

5-year

• Guidance: MS + 24bps area
• Tranche Size: E5bln (MNI see potential to increase)
• Maturity: 14 October 2030
• ISIN: EU000A4EG021

30-year

• Guidance: MS + 121bps area
• Tranche Size: E5bln (MNI see potential to increase)
• Maturity: 12 October 2055
• ISIN: EU000A4EG039

For both:

• Settlement: 16 September 2025 (T+5)
• Coupon: Long first
• JLMs: Barclays / BofA / CACIB / LBBW / MS (B&D/DM)
• Timing: Books Open, Today's Business

From market source / MNI colour