WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: The majority of European bourses were firmer in early trade on Tuesday on investor relief that the first round of the French presidential elections yielded the most market friendly outcome. Increased appetite for risk taking continued to weigh on fixed-income safe-havens. German Bunds underperformed USTs with the 10-yr yield spread shrinking to five-month lows. In FX markets, the USD was little changed against most of its major peers with investors awaiting an outline of Donald Trump’s tax plan, expected on Wednesday. Elsewhere, the CAD was among the main underperformers on news that the US administration will impose an average 20% tariff on Canadian softwood lumber imports.
GREECE: The institutions’ (EC/ESM/ECB/IMF) mission returned yesterday to Athens to resume deliberations with the Greek government in order to reach a staff level agreement potentially by the beginning of next week. According to press reports, the draft documents of the updated Memorandum of Understanding (MoU) and the Memorandum of Economic and Financial Policies (MEFP) that Greece is to agree with its European partners and the IMF respectively have already been prepared and will constitute the basis for the discussions and the staff level agreement. Assuming that deliberations proceed smoothly, that all required items are legislated in time and that Greece’s partners reach a compromise on the medium-term debt relief framework, a global agreement at the May 22nd Eurogroup is possible.
SOUTH EASTERN EUROPE
CESEE MARKETS: The majority of emerging market assets retained a firm tone earlier today as the risk-on mood – after the first round of the French presidential elections on Sunday – continued to favor investor appetite towards higher yield.
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