German election: Limited impact on SSAs and covered bonds - HSBC


Analysts at HSBC point out that German Federal elections will take place on 24 September but the market is focused on other events, such as the ECB taper decision and they expect limited impact from the elections on SSAs and covered bonds even in a scenario where the SPD wins.

Key Quotes

Markets likely to be unfazed on election outcome 

The latest polls for the election next Sunday point to a win for Angela Merkel’s party, making a CDU/CSU-led government the most likely scenario. However, even in the event of an SPD-led coalition government, market reaction would be subdued in our view, because attention is focused on other events.”

An SPD win would imply higher Bund yields, but only briefly 

Bund yields are likely to rise if the CDU/CSU fail to win as markets might get concerned that the new government will depart from the stability path of the current government. However, we expect this initial reaction to normalise quickly as markets will focus on other factors, such as ECB tapering and geopolitical risks.”

Greater Eurozone integration is positive for SSAs

A CDU/CSU-led government would be neutral to somewhat negative for agency and supranational spreads vs Bunds, depending on the type of coalition. An SPD-led government would be positive and would see spreads tighten.”

Likely longer run impact on the ESM (European Stability Mechanism)

The outcome of the German election is likely to influence the evolution of the European permanent rescue vehicle. Talks of changing the ESM into a Eurozone equivalent of the IMF have increased recently and have received support from countries, such as Germany. An SPD-led coalition would most likely push for an overhaul of the fund.” 

Impact on covered bonds less pronounced 

Any yield change of German Pfandbriefe on the election outcome is likely to be limited to low single-digit movements in case of a SPD-led government. If the CDU/CSU win, yield levels of Pfandbriefe should stay broadly unchanged.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD drops below 1.1300 for the first time in two weeks

Euro held up well on Monday despite the market’s deeply risk-off tone, with the pair finding good dip-buying interest when it hit the 1.1300 level earlier in the session and recovering to trade flat on the day in the 1.1320s.

EUR/USD News

GBP/USD extends daily slide toward 1.3450

GBP/USD continues to stretch lower toward mid-1.3400s on Monday as the mood continues to sour. Wall Street's main indexes are down between 1.7% and 2.1% after the disappointing PMI data from the US.

GBP/USD News

XAU/USD bulls moving in on the psychological $1,850

Gold is headed for a positive close on Monday following a heavily risk-off session and a run for safer havens. At the time of writing, gold is up 0.3% after climbing from a low of $1,829.76 and reaching a high of $1,844.37 so far with eyes on the psychological $1,850 level. 

Gold News

Crypto carnage continues to unfold

Bitcoin price has witnessed a massive crash over the past week, undoing the gains seen since July 25. Ethereum, Ripple and other altcoins have followed suit, experiencing an even worse crash. 

Read more

US: Markit Services PMI falls to 50.9 versus 55.0 expected

Manufacturing, Services and Composite PMI all fell to their lowest levels since 2020. There didn't seem to be much reaction at the time but the downbeat data likely won't help the market's mood improve. 

Read more

Forex MAJORS

Cryptocurrencies

Signatures