FED: Semi-Annual MonPol Report Sees "Somewhat Restrictive" Financial Conditions

US Secretary of State Antony Blinken and French Foreign Minister Jean-Noël Barrot have spoken on a range of issues to reporters at a press conference in Paris, following a bilateral meeting earlier today.

• At the top of the presser, both ministers note that the Lebanon-Israel ceasefire agreement is operating as planned, with a withdrawal of 30% of Israeli troops from Lebanon underway. 
• On Gaza, Blinken says: “We’re very close to a ceasefire and hostage agreement… I hope we can get it over the line in the time we have left but if we don’t, then the plan will be handed over to the [Trump administration].”
• Blinken reiterated that a “transformative” agreement to normalise relations between Israel and Saudi Arabia is “ready to go” if there is a ceasefire in Gaza.
• On US President-elect Donald Trump’s proposed acquisition of Greenland, Blinken said: “The idea expressed about Greenland is obviously not a good one, but maybe more important: It’s obviously one that is not going to happen, so we probably shouldn’t waste a lot of time talking about it.”
• Barrot says that the Franco-US relationship has survived 59 US elections, and “will survive the 60th”.
• Barrot: “Do we think the US will take Greenland? The answer is no… That being said we are entering a period of time where force is present everywhere…”
• Barrot quotes a comment from French President Emmanuel Macron on Monday saying that Europe needs to “wake up” and “strengthen up”.

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. 

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.