FRANCE: Bayrou Approval On The Rise, But 3rd Censure Vote Looms (2/2)
There is significant uncertainty surrounding the so-called 'spontaneous censure motion' that the PS intends to bring against the gov't next week. This is in regards to Bayrou's comments earlier in the month talking about a feeling of immigration 'flooding' France, decried by leftist parties as aping the far-right. With the PS and presumably the rest of the leftist New Popular Front (NFP) alliance parties in favour, if the RN backs the motion it would be enough to oust Bayrou.
- However, PS deputy and former French President Francois Hollande said on 6 Feb that the motion "is not made to bring down the government, but to challenge it", adding "If the RN joined it, at that moment we would take our responsibilities", an indication the PS would not vote in favour in order to keep the gov't in place.
- This would seem to counter PS' leader in the National Assembly Boris Vallud who said on 5 Feb that the PS wants "a left-wing government". Indeed, PS deputy Laurent Baumel, an advisor to PS First Secretary Olivier Faure, said in response to Hollande "This is not our collective position. Thank you Hollande for not speaking in our name."
- The differences on policy within various alliances, and indeed within parties, makes for a very uncertain political environment. This risks events such as an ouster of the Bayrou gov't in a PS censure motion coming to fruition via miscalculation rather than concerted effort.
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CANADA: Fin Min LeBlanc Says He Won't Run For LPC Leader
Finance Minister Dominic LeBlanc has confirmed that he will not enter the race to succeed Prime Minister Justin Trudeau as leader of the centre-left Liberal Party of Canada (LPC). In a statement, LeBlanc - who took over from long-standing Finance Minister Chrystia Freeland following her resignation in December 2024 - said that his focus and that of his gov't departments must be on the threatened imposition of tariffs from the US once President-elect Donald Trump comes to office.
- The two frontrunners to take over from Trudeau remain Freeland and former BoC and BoE governor Mark Carney. Betting markets are somewhat divided.
- Polymarket has Carney as the favourite to become the LPC leader with a 40% implied probability to Freeland's 35%.
- Data from Kalshi shows bettors giving Freeland a 43% implied probability of being the next PM compared to 38% for Carney (the two websites ask slightly different questions, but the next LPC leader - barring unforeseen circumstances - will become the PM and as such can be seen as essentially the same).
- Whether Carney, Freeland, or another potential candidate emerges as LPC leader and PM they are unlikely to have a significant amount of time before an election campaign.
- The leftist New Democratic Party and the regionalist Bloc Quebecois, both crucial to avoiding defeat for the minority LPC gov't in previous confidence votes, have said they support an election at the nearest opportunity. Opinion polling continues to show the main opposition centre-right Conservatives on course for a comfortable majority.
STIR: ECB Pricing Back To Little Changed On the Day As Bonds Recover
ECB-dated OIS back to little changed on the day, with the Dec ’25 contract showing ~102.5bp of cuts.
- Dec meeting pricing briefly moved to ~99bp of cuts at one stage today, during the broader sell off in wider core global FI markets.
- Bonds have since recovered from session lows, which has fed into the stabilisation in STIRs.
- Euribor futures last +1.0 to -5.0.
- November lows in ERZ5 & Z6 still some distance below.
- Hawkish media speculation surrounding Trump’s tariff preferences continue to shape discussions, with debate around the ECB’s reaction to growth and inflation risks seen.
- Markets have previously assumed that harsher tariffs from the U.S. would promote a dovish ECB reaction function, owing to economic growth worries.
- This may have also factored into the modest dovish move seen this afternoon.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jan-25 | 2.675 | -24.3 |
Mar-25 | 2.401 | -51.7 |
Apr-25 | 2.226 | -69.2 |
Jun-25 | 2.080 | -83.9 |
Jul-25 | 2.028 | -89.0 |
Sep-25 | 1.951 | -96.8 |
Oct-25 | 1.921 | -99.7 |
Dec-25 | 1.894 | -102.4 |
FED: US TSY 17W AUCTION: NON-COMP BIDS $619 MLN FROM $64.000 BLN TOTAL
- US TSY 17W AUCTION: NON-COMP BIDS $619 MLN FROM $64.000 BLN TOTAL
