FRANCE: Three MPs Ousted Over Campaign Spending Issues
Three members of the National Assembly have been "automatically resigned" from office for the period of a year by the Constitutional Council following the rejection of their campaign accounts from the 2024 legislative election. Jean Laussucq (Paris 2nd) and Stephane Vojetta (French nationals living abroad 5th), hailing from the centrist Ensemble alliance supportive of President Emmanuel Macron, and Brigitte Bareges (Tarn-et-Garonne 1st) from the right-wing UDR Group led by Eric Ciotti have been declared ineligible for office after a referral by the National Commission for Campaign Accounts and Political Financing. Partial legislative elections will have to be held for their seats.
- It is yet to be confirmed when the elections for the three lawmakers' seats will take place, but Le Monde reports it will be 'soon'. In the 2024 election, Laussucq defeated the Socialist NFP candidate in his seat by 56-43%, Vojetta won among French living in Portugal and Spain 61-39% ahead of the far-left NFP candidate, while Bareges narrowly defeated the Socialist NFP candidate in her seat 51-49%. For the gov't, the best outcome may be the retention of both Laussucq and Vojetta's seats, while a worst-case scenario would see the right retain Bareges' and the loss of both other seats to opposition leftist candidates.
- In the autumn, the minority gov't faces the difficult prospect of passing the state budget and social security budget. Battles over the budget also risk the left-wing New Popular Front or the right-wing Rassemblement National bringing a no-confidence vote against PM Francois Bayrou.
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OUTLOOK: Price Signal Summary - Bull Cycle In Gilts Remain Intact
- In the FI space, the latest pullback in Bund futures still appears corrective - for now - and the trend condition remains bullish. Moving average studies are in a bull-mode position highlighting a dominant uptrend. A resumption of gains would signal scope for a climb towards 131.85, the Apr 22 high and a key resistance. Key short-term support to watch is 128.97, the May 14 low. First support lies at 130.12, the Jun 5 low.
- Gilt futures traded higher yesterday, resuming their short-term uptrend, strengthening the current bullish theme. This also marks an extension of the breach of resistance at 91.87, the May 20 high. The climb signals scope for a continuation higher and sights are on the 93.00 handle next. Initial firm support to watch lies at 91.56, the Jun 9 low. A clear break of this level is required to signal a possible reversal. For now, short-term weakness is considered corrective.
US TSYS: Early SOFR/Treasury Option Roundup: Puts Pre-CPI
Modest SOFR & Treasury option volume overnight, SOFR leaning towards downside puts with some decent 5Y Tsy put buying as markets await this morning's key CPI inflation data. Projected rate cut pricing steady to slightly cooler vs. late Tuesday (*) as follows: Jun'25 steady at 0.0bp, Jul'25 steady at -3.6bp, Sep'25 at -16.6bp (-16.9bp), Oct'25 at -28.1bp (-28.6bp), Dec'25 at -43.1bp (-44.2bp).
- SOFR Options:
- 5,000 SFRU5 95.50 puts, 0.5 ref 95.845
- 1,700 SFRU5 95.75/95.81 2x1 put spds
- 2,000 SFRU5 95.81/95.93/96.06 call flys
- 3,000 SFRN5 95.37/95.62/95.75 broken put flys
- 2,000 SFRZ5 95.56/95.68/95.81 put flys ref 96.08
- 3,400 SFRU5 95.75 puts ref 95.85
- 1,500 SFRQ5 95.81 puts, ref 95.845
- Treasury Options:
- 2,000 TYN5 113/113.5 call spds ref 110-04.5
- over 10,000 FVN5 107.5 puts, 14-15 ref 107-20.5
- near 5,000 FVN5 107.5/108 strangles
- +3,000 wk2 US 111 puts, 6-7 ref 112-14 to -17
- Block, 8,000 TYN5 112 calls, 2 ref 110-06.5
- 2,000 Mon wkly TY 110 puts ref 110-07.5
FOREX: EURJPY Rally Extends to Y166, Approaches Nov 06 High
- Despite the subdued price action for FX markets as we approach the US inflation data, EURJPY has extended its recent rally, rising 0.3% on the session and printing back above 166. A positive close today would represent five consecutive winning sessions. Spot has significantly narrowed the gap to the US election related highs at 166.10 as equity markets remain cautiously optimistic regarding global trade negotiations.
- The hawkish reaction to last week’s ECB will likely be assisting the cross, as markets appear confident on the next leg for the single currency, but remain more wary of the short-term trajectory for the dollar. Above here, 166.69 (Oct 31 high) is a key resistance for EURJPY, before a couple of daily highs around the 168 mark. The prior breakout point at 165.21 becomes initial support.
- Lower-than-expected PPI data in Japan crossed overnight and as a reminder on Tuesday, Governor Ueda struck a dovish tone by telling parliament the central bank is still some distance from its inflation goal.
- Separately, Japan's government left its overall economic assessment unchanged for a third straight month in June but adjusted its view on corporate profits and overseas economies amid the ongoing impact of U.S. trade tariffs, the Cabinet Office said Wednesday.
