GERMANY: CDU Asylum Laws Will Not Pass Despite AfD Backing As BSW Abstains
Jan-29 12:36
It appears unlikely that there will be a majority in the Bundestag today for the five-point plan to tighten migration laws put forward by opposition conservative Christian Democratic Union (CDU) leader Freidrich Merz. This is after the left-wing nationalist Sahra Wagenknecht Alliance (BSW) said that it would abstain on today's vote on migration law, as well as on the CDU plan for enhancing internal security.
- There was the prospect that the measures on migration law could get through despite opposition from the minority gov't of Chancellor Olaf Scholz. The CDU (and its Bavarian sister party the Christian Social Union) have the support of the pro-business liberal Free Democrats (FDP) and controversially the far-right Alternative for Germany (AfD). Support from the BSW would have resulted in a majority.
- The prospect of the CDU gaining the backing of the AfD is seen as a threat to the 'firewall' surrounding the right-wing party that has stopped other parties from cooperating with the AfD at the federal or state level.
- Another test comes on Friday 31 Jan, when there is set to be a vote on the 'Influx Limitation Act'. The BSW has said that it will back this measure. With the CDU/CSU, AfD, and FDP all set to support the bill this will ensure a majority.
- With the federal election on 23 Feb, signs of any cooperation between the CDU and AfD will be closely scrutinised for signs of whether the 'firewall' will remain in place post-election.
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STIR: Large Jun'25 SOFR Midcurve Option Package
Dec-30 12:31
- Just over 33,000 0QM5 96.37/97.00 call spds vs. 95.37/95.62 put spds ref 96.02 - checking direction.
US TSYS: Tsys Unwinding Friday's Sale, PMI, Pending Home Sales Ahead Year End
Dec-30 11:47
- Treasuries are looking modestly firmer, near early early London session highs as rates recover from Friday's sell-off. The Mar'25 10Y contract trades 108-19 last (+5) vs. 108-21 high on decent volumes heading into year end: just over 175k at the moment.
- Average to small year-end duration extensions: US +0.07Y, EU: +0.04Y, UK -.02Y (Bbg)
- Tsy 10Y yield at 4.5951% (-.0303), curves mixed with 2s10s -.342 at 28.950 despite overnight Block steepener: +4,276 TUH5 at 102-22.75 vs. -2,592 TYH5 108-17.5 (0256:12ET); 5s30s +1.752 at 37.159.
- Projected rate cuts into early 2025 look steady to slightly higher vs. late Friday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.6bp (-13.3bp), May'25 -19.5bp (-18.5bp), Jun'25 -28.8bp (-26.5bp).
- Data on tap (prior, estimate): MNI Chicago PMI (40.2, 43.0) at 0945ET, followed by Pending Home Sales at 1000ET MoM (2.0%, 0.8%), YoY (6.6%, 7.9%). Dallas Fed Mfg Activity at 1030ET (-2.7, -3.0). Dearth of scheduled Fed speak until Richmond Fed's Barkin gives keynote remarks at a Maryland Bankers assn event on January 3 at 1100ET (text & Q&A).
- Treasury auctions $84B 13W, $72B 26W bills at 1130ET followed by 75B 42D CMBs at 1300ET.
EUROPEAN INFLATION: Portugal HICP Accelerates, Core CPI Also Higher
Dec-30 11:41
Portugal HICP rose to 3.1% Y/Y in December, its highest since June 2024 and notably above November's 2.7%. The national CPI measure also saw some acceleration, both on headline (3.01% vs 2.47% Nov) as well as on core (2.80% vs 2.61% Nov). Behind the higher CPI headline, Statistics Portugal identifies energy and unprocessed food as the predominant drivers.
- Specifically, energy CPI came in at 4.89% Y/Y (2.14% Nov, mainly driven by base effects as M/M this was +0.43%), while unprocessed food CPI was 3.42% Y/Y (1.95% prior, again partially a base effect as this was +0.50%M/M).
- CPI excl. housing accelerated just over 0.5pp, as headline, indicating that rental inflation saw a similar increase to the wider index (+0.10% M/M).
- For reference, Portugal contributes 2.4% to the overall Eurozone HICP 2024 basket.
- December flash inflation data for Ireland will be released tomorrow, with the other major releases of the December round out next week. Belgium HICP already came in at 4.4% Y/Y, decelerating four tenths vs November, while Spain HICP surprised consensus to the upside earlier today (2.8% Y/Y vs 2.6% cons).
