OUTLOOK: Price Signal Summary - Corrective Cycle In Bunds Still In Play

Following his election as chair of the centre-left Social Democratic Party (SPD) faction in the Bundestag, SPD co-leader Lars Klingbeil has confirmed that he and leader of the centre-right Christian Democratic Union (CDU) Friedrich Merz have agreed to speak soon in order to set up a timetable for coalition talks. Says "It is the SPD's will to achieve a functioning government" adding "it is also up to Merz". 

• Disagreements between the CDU and SPD are already evident over a 'minor inquiry' put forward by the Union. Titled "Political neutrality of state-supported organizations" it asks 551 questions of non-profits that receive state funding. Some of these groups mobilised against Merz following the CDU voting alongside the far-right Alternative for Germany (AfD) on a motion in January related to asylum and immigration.
• The leader of the SPD's youth wing (Jusos) in the state of Thuringia has demanded the Union withdraw the inquiry before the SPD begins coalition talks.
• The actions of Jusos should not be discounted in influencing SPD policy. In 2018, Jusos national chair Kevin Kühnert led a vocal (if eventually unsuccessful) opposition to the formation of a 'grand coalition' with the CDU then led by Angela Merkel.
• With the SPD coming off the back of its worst election result in over a century, and Merz sitting to the right of Merkel in terms of economic and social policy, a Jusos-led opposition to a 'grand coalition' could pose obstacles, given that the approval of SPD grassroots members will be needed for any coalition deal. 

SONIA FIX - Source: BBG/ICE

• 1M 4.45860 -0.0015
• 3M 4.42310 -0.0022
• 6M 4.32680 -0.0058
• 12M 4.18700 -0.0238

• MNI: US MBA: MARKET COMPOSITE -1.2% SA THRU FEB 21 WK