THAILAND: Shinawatras Under Fire, Court Set To Rule In Thaksin's Case On Aug 22
The powerful Shinawatra family controlling the ruling Pheu Thai Party (PTP) remains under intensifying pressure as the Criminal Court said it would announce a verdict in a lese-majeste case against the clan's patriarch Thaksin Shinawatra on August 22. If deemed guilty, Thaksin could be looking at between three and 15 years in prison over an interview he gave to the South Korean newspaper Chosun Ilbo in 2015.
- Meanwhile, the Constitutional Court will convene tomorrow to review a pending ethics case against suspended Prime Minister Paetongtarn Shinawatra, privately Thaksin's daughter. Paetongtarn applied for an extension to the deadline to submit her defence paperwork, but the Court is yet to respond to her request. Separately, Thailand's anti-corruption commission yesterday confirmed launching a probe against the beleaguered Prime Minister.
- Conventional wisdom is that the Thai judiciary is aligned with with the conservative establishment with links to the monarchy and the military, providing an important instrument of influence for this side of the political spectrum. The country's strict public ethics and lese-majeste laws have repeatedly been used to change political outcomes. Paetongtarn's predecessor Srettha Thavisin was unseated in an ethics case, while election front-runner Pita Limjaroenrat was banned from politics.
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BONDS: Off Lows On Cross-Market Cues, Curves Steeper
The weakness in core global FI markets stalls a little in recent trade, seemingly driven by cross-market inputs, with crude oil futures ticking to fresh session lows and Friday’s high in Euro Stoxx 50 futures holding.
- Core global FI curves still bear steepen on the day.
- No readthrough from comments from ECB’s Nagel & de Guindos.
- ECB pricing remains biased towards 1 further 25bp cut in the current cycle, while BoE pricing shows ~45bp of easing through year-end.
SWEDEN: New 3-year EUR SGB Benchmark
"The Kingdom of Sweden, rated Aaa/AAA/AAA (all Stable) by Moody's/S&P/Fitch, has mandated Danske Bank, Goldman Sachs Bank Europe SE, J.P. Morgan and SEB to lead manage its forthcoming 3-year (due 26 June 2028), fixed rate, EUR-denominated, RegS, syndicated benchmark transaction. The transaction will be launched in the near future, subject to market conditions."
From Market source
EGBS: OLO Underperformance Limited With Ratings Risk Already In The Price
The 10-year OLO/Bund spread has seen a fairly contained impact from Fitch’s rating downgrade on Friday, currently 0.5bps wider at 57bps. While still slightly underperforming EGB peers on the session, a downgrade did not come as a large surprise given Fitch had held Belgium on a negative outlook since March 2023. A simple yield/ratings curve illustrates that OLO pricing already incorporates a degree of ratings risk premium. The next Moody’s and S&P ratings decisions are not due till October, with both agencies also holding Belgium on a Negative Outlook at present.
- Fitch noted that “Belgium's fiscal position has structurally weakened over the last few years and we expect a continued moderate upward trend for general government debt/GDP.” Meanwhile, medium-term risks come from “rising ageing expenses, higher defence spending and, to a lesser extent, higher EU transfers and rising interest expenses”.
- Although the Federal government has outlined a fiscal savings package through 2029, Fitch note that “Belgium's recent record of delivering consolidation measures has been relatively weak”. Specifically, “almost one-third of savings is expected to come from the second-round effects of structural reforms, but Belgium's Court of Audit has identified a very high risk that the government is significantly overestimating these effects.”
- Elsewhere, S&P affirmed Germany’s rating at AAA (Outlook Stable), highlighting that “Germany's new fiscal package could push budget deficits to over 3.5% of GDP by 2027, significantly above our previous forecast (1.3% of GDP), but the additional investment spending could raise Germany out of its current economic malaise, with our expectation of real economic growth of 1.5% in 2026-2028.”
- The 10-year BTP/Bund spread has unwound 1bp of Friday’s 2bp widening, with equity sentiment supported this morning despite continued tensions in the Middle East.
