WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: Preliminary results from the first round of legislative elections in France that were held on Sunday 11th of June suggest that President Emmanuel Macron’s party La République En Marche and its allies are set to win around 32% of the vote and well over 400 seats in the 577-seat National Assembly, the biggest parliamentary majority since 1993. The outcome of the first round favored government bonds with the 10-yr OAT/Bund yield spread narrowing to multi-week lows. In Italy, reduced risk of snap elections favored sovereign paper with the 10-yr BTP yield dropping to the lowest in more than five months. In FX markets, the outcome of the legislative ballot in France and the municipal elections in Italy exerted some positive impact on EUR while GBP remained under pressure amid increased political uncertainty after last week’s inconclusive election outcome. This week’s major key event is the Fed’s two-day monetary policy meeting that concludes on Wednesday where a 25bps rate hike is fully priced-in.
GREECE: The French Finance Minister Bruno Le Maire is expected to visit Athens today to hold meetings with the Greek PM Alexis Tsipras, the Finance Minister Euclid Tsakalotos and the Governor of the Bank of Greece Yiannis Stournaras. During his visit he will reportedly discuss the French proposal regarding the Greek public debt, according to which the scope of the debt relief measures will depend on the GDP growth in the medium-term. With respect to the conclusion of the 2nd programme review, it is expected that a positive compliance report will be drafted that will allow for the political approval of the next loan disbursement by the June 15th Eurogroup, the size of which may be between €7.4 to €11 bn.
SOUTH EASTERN EUROPE
BULGARIA: Bulgarian equities ended mixed last week with all major benchmarks pointing to losses except for the blue-chip SOFIX. Meanwhile, the domestic sovereign debt yield curve was little changed except for the 3 and 4 year tenors, with corresponding yields sliding by 11-12 basis points on the week. Eurobond yields also marked declines between 5 and 9 bps.
SERBIA: The EUR/RSD found support at 122.05/25 last week following renewed Central Bank intervention in the FX market aimed at halting further appreciation of the dinar.
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