Investor worries about France’s upcoming elections have eased slightly but aren’t showing much sign of going away, with the premium they demand to hold France’s benchmark bonds over Germany’s touching a fresh four-year high earlier today.
Having retreated yesterday, the yield gap between French and German 10-year bonds hit 79 basis points on Wednesday morning before falling back to 75.88 by publication time.
That’s slightly below yesterday’s closing level, but still far above where it was before fears about the potential for a Front National victory in May’s presidential election began to rise over the weekend.
After rising first thing in the morning, the yield on France’s 10-year bonds had fallen 1.4 basis points (0.014 percentage points) by publication time, reflecting a slight increase in the bonds’ price. Yields on Germany’s benchmark Bunds were 1.3bps lower, their fifth consecutive day of falls.
Although polls still show that FN leader Marine Le Pen is likely to be defeated in May’s election, the precipitous fall from grace of centre-right candidate Francois Fillon has prompted fears that Ms Le Pen could pull off a shock victory.
Ms Le Pen has vowed to pull France out of the eurozone and redenominate the country’s national debt, proposals that the European Central Bank’s highest-ranking French official has said would consign the country to “impoverishment”.