ISRAEL: Security Cabinet Starts Meeting On Gaza Ceasefire Deal
The Security Cabinet is meeting to sign off on the Gaza ceasefire-for-hostages deal after PM Benjamin Netanyahu confirmed that his negotiating team in Doha had approved a final agreement. After the Security Cabinet approves the deal it will then move to the full Cabinet on the evening of 18 Jan. So far the two ultranationalist parties in gov't, Security Minister Itamar Ben-Gvir's Otzma Yehudit (OY) and Finance Minister Bezalel Smotrich's Religious Zionism (RZ) have both raised objections.
- Ben-Gvir has said that if the deal is approved he and his party will quit the gov't, but that they would not seek to remove Netanyahu as PM. The loss of OY's six Knesset members (MKs) would see Netanyahu's coalition lose its majority. Ben-Gvir said his party would return to gov't if the war in Gaza is resumed.
- Reports suggest that Smotrich's RZ will vote against the deal, but will not quit the gov't yet. N12 reports Smotrich saying that "without a full return to war - we will resign," indicating that if the IDF does not resume its offensive against Hamas at the end of the six-week first phase RZ will pull out of gov't. Such a move, combined with OY's withdrawal, would see the Netanyahu gov't lose its majority in the Knesset.
- With Diaspora Affairs Minister Amichai Chikl from Netanyahu's Likud also threatening to resign over the deal there remain sizeable risks to the stability of Netanyahu's gov't as the extremely precarious ceasefire deal comes into force from 1600 local time on Sunday 19 Jan/.
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BONDS: Ticking Lower
Core global FI markets tick lower over the last hour or so.
- Contained uptick in oil probably a factor here, EUR 5y5y inflation-linked swaps +2bp or so on the day unwinding some of yesterday’s ~3bp downtick.
- Nothing in the way of particularly hawkish commentary from ECB chief economist Lane at the MNI event, so that hasn’t been a factor.
- Most participants are probably unwilling to take on fresh positions given the time of year and impending run of central bank decisions, meaning it won’t take much to move markets.
- German yields -1.5bp to +2.5bp, curve twist flattens.
- EGB spreads to Bunds little changed to 1bp wider.
- Tsys and gilts both ~1bp narrower to Bunds.
- Gilts unwind most of the initial CPI driven bid, futures test yesterday’s low.
ECB: Q&A With Chief Economist Lane at MNI Event Has Started
The Q&A with Chief Economist Lane has started. Asked how long the ECB is likely to continue with the current meeting-by-meeting and data dependent approach:
- Lane notes that the meaning of what has been decided on a meeting by meeting and data dependent approach has changed through the course of the post-covid rate cycle.
- Looking ahead, the concept of “meeting-by-meeting” will be more based on an assessment of the risk outlook, given the uncertainty currently present.
- This rhetoric is broadly in line with the themes in Lane’s interview on December 2.
EQUITIES: Estoxx Put Spread
SX5E (21st Mar) 3800/3200ps 1x2, bought for 2.2 in 5k.
