European government bonds are the big losers in Tuesday’s trading, with investors snapping up equities and dumping debt following the election of centrist French president Emmanuel Macron.

Sovereign bonds are down across the board in the continent this morning, pushing up yields and with them the implied cost of borrowing for the continent’s governments.

Italy is the biggest mover today, with its 10-year yield gaining 4 basis points (0.04 percentage points), while equivalent maturity German Bund yields are up 3bps, and French debt yields have gained 2.5bps. In the UK, 10-year gilt yields have climbed 3.7bps to their highest level since March. (Yields rise when prices fall.)

Equities meanwhile are all in the green as the dust begins to settle on Mr Macron’s comprehensive defeat of his far-right eurosceptic rival Marine Le Pen on Sunday. European stocks have reversed course after closing lower on Monday, with France’s CAC 40 0.35 per cent higher this morning and Germany’s Dax gaining 0.26 per cent.

One measure of market nerves, the Vix index, has closed at its lowest level since 1993 on Monday.

With the eurozone’s growth prospects brightening in a year that has seen right-wing populists fail to gain power in Austria, the Netherlands and France, bond yields are also getting a kick higher from expectations of a gradual change in course from the European Central Bank.

Yesterday, Yves Mersch of the governing council said the central bank was close to shifting from its current bias for more easing towards “neutral”.

“The recovery in the euro area is gaining more and more traction. The confirmation of a broadly balanced risk outlook for growth is within reach,” said Mr Mersch.

“If the euro area economy recovers and inflation proceeds further on its path towards the ECB’s inflation aim in a sustained manner, a discussion on policy normalisation becomes warranted in the future”, he added. (More on that here.)

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