AUTOMOTIVE: Forvia (EOFP Ba3/BB-/BB+[N]): 1Q25 Sales

Q: Do you agree with De Guindos’ comments in an interview with the Sunday Times. How exactly do you feel about current interest rates here, with a view to restrictive language?
A: I would very much agree with De Guindos. In the US, the impact on inflation is likely to be more significant because the consumer pays for tariffs at the end of the day. In the Eurozone, the predominant impact is the negative impact on growth with to some extent an inflation dampening effect. The overall net impact is difficult to judge ex ante though.

On the Bank of Finland study and comparisons with private figures, our figure gives a fairly high figure and it’s typical of macroeconomic studies across the board. Current tariff coverage is 5-6% of EU exports to US so its substantially smaller than what we assumed.

On “meaningfully less restrictive”, it’s useful to say that the financing conditions have seen some easing. Look at the growth and level of loans to businesses and households but we’re starting from a relatively low level and the change is still relatively small. I would still quality conditions as tight. As things look now, even compared to our early March meeting, some of the downside risks will likely materialise (referring especially to Trump tariffs on EU steel & aluminium). Meanwhile, the expect increase in defence spending in some cases increased but the strongest effect will likely have an impact in the medium term. On the other hand, inflation risks are more balanced. My tentative conclusion based on recent data and forward looking prospects indicate that to reach our goal of 2% inflation the right reaction should be to cut but if data indicates otherwise then we should pause.

An earlier question on Rehn's retrospective reflection of monetary policy and what has been learned over the past year.

Rehn: I have a European standpoint when deciding on ECB policy but the country I understand best is Finland. We feel the tightening of monetary policy very quickly in Finland with variable rates but are also seeing relief from easier policy now. A year ago, we could see the tightening effect more concretely in Finland than in many other countries. In spring last year I was relatively confident in the disinflationary path and it wasn’t difficult to support the subsequent rate cut decisions.

OI data points to a mix of positioning swings during yesterday’s twist flattening of the curve, with net long cover (TU & FV), short setting (TY), short cover (UXY & US) & long setting (WN).

• Cover was more prominent than fresh position setting. 

SX7E (20th June) 155/150ps, bought for 0.25 and 0.45 in 15k.