COMMUNICATIONS: Swisscom Q4 Results

• A full reversal for Bund, albeit still in very contained ranges overall, surprisingly the Bobl outperforms somewhat, but the strip is still nonetheless closer to their earlier lows.
• Schatz is sold in 5.3k, Bund 5.2k cumulative volumes, no Block.
• Italian BTP is holding onto gains, helping keep the spread vs Bund 2.4bps tighter, and some of the pullback lower is met by buying interest, BTP is bought in 3k in three clips.

Speaking to BFM TV leader of the centre-left Socialist Party (PS) Olivier Faure says that after conversations with PM Francois Bayrou overnight they could see a non-censorship agreement in exchange for a suspension/freeze/pause of the controversial 2023 pension reforms, among other policies. Faure says that any such agreement not to vote for the gov'ts censure in confidence motions would apply to today's general policy speech from Bayrou (taking place in the National Assembly at 1500CET (0900ET, 1400GMT) as well as the social security budget (PLFSS) and state budget (PLF). However, it would not apply to general gov't policy beyond that. 

• Faure says that he has made a proposal to Bayrou that would win the PS' support but will not reveal it. Instead, he says "if the Prime Minister definitively accepts it, it is up to him to announce it."
• A move to suspend the increase in the pension age could bring the PS on board, but would risk alienating the conservative Republican Right. President of the Senate Gerard Larcher: "I have no problem with [Bayrou] being open and having dialogue with the left. It's just that, on matters of state and budget, there are things that the right will not give up," It would also risk alienating President Emmanuel Macron, for whom the pension reforms stand as an issue of legacy.
• Support from the PS would likely prove sufficient for the Bayrou gov't to avoid censure in a 16 Jan censure vote. no matter whether the Republican Right votes for or abstains.

Ahead of this morning’s OAT-positive headlines Citi wrote “we turn neutral on BTPs, while risk of further widening is perhaps elevated for OATs around today’s inaugural policy speech by PM Bayrou.”

• “The speech is likely to be followed by a confidence vote.”
• “Dilution of the reform or government collapse is likely to weigh on OAT spreads.”
• They conclude with “regardless of the immediate outcome, OATs might begin to price in an eventual change in the pension reform anyway - if not under the current parliament, then after a potential legislative election later this year where the likelihood of a far-right/left majority has perhaps increased vs. the 2024 election.”