France Yield Spread Nears Four-Year High as Political Risk Grows

  • Markets await Fillon press conference in Paris at 4 p.m. CET
  • Yields on nation’s 10-year bonds climb for a second day

AB's Loughney Sees French Markets Focused on Uncertainty

The spread between France and Germany’s bonds approached the widest since 2013 as the political plot thickened amid the most unpredictable election campaign in decades.

The difference widened for a second day as French citizens prepare for the first round of presidential polls due on April 23. Francois Fillon, the Republican candidate, is due to hold a press conference later Monday. His party is divided on whether Fillon should be replaced following reports that his wife and two of his children allegedly earned more than 900,000 euros ($967,000) in public funds as parliamentary aides without actually doing a commensurate amount of work.

If Fillon quits the presidential race, the "first reaction could be a relief for French bonds, but then the fate will depend on who the substitute is," Cyril Regnat, a Paris-based fixed-income strategist at Natixis SA, said in e-mailed comments.

The yield difference between France’s 10-year notes and comparable securities in Germany touched 74 basis points on Monday, shy of the 77-basis-point levels seen in March 2013. The spread was 71 basis points as of 11:34 a.m. in Paris, having widened 23 basis points this year. The yield on the nation’s 10-year bonds rose three basis points to 1.11 percent, climbing for a second day.

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