- As mentioned above, a hung parliament looks likely in France, still the far-right movement appears to be halted. This translates into a drop in yield spreads between France and Germany. Last week, the spread between the two 10-year sovereign bond yields rose towards 81 basis points when Marine Le Pen’s far-right party was in the lead. The gap now narrows to 65 basis points, with, on average, the spread being around 50 basis points in normal conditions.
- Markets are applauding the stalemate situation because the far left party has no majority to pass its extensive and excessive spending agenda. Actually, not any party will be able to push through any sort of reform until the next elections, which will be the Presidential ones, on April 11, 2027.
- Over the weekend, more democratic key people in the US came out to ask President Joe Biden to resign and pave the way for someone else.
- At 15:30 GMT, the US Treasury Department will auction a 3-month and a 6-month bill.
- The US Consumer Credit Change for May is expected to rise to $8.65 billion from $6.4 billion.
- All major indices are marginally in the red, looking for direction from across Asia or Europe into US futures. This Monday could be a volatile, choppy ride.
- The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Fed officials. The odds now stand at 69% for a 25-basis-point cut. A rate pause stands at a 26.1% chance, while a 50-basis-point rate cut has a slim 4.8% possibility.
- The US 10-year benchmark rate trades at 4.29%, near its weekly low.
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