French Bonds Decline as Juppe Stays Out of Presidential Race

  • Nation’s yield spread over German widens from one-month low
  • Juppe statement may boost chance of Le Pen making run-off

France's Fillon Vows to Remain in Presidential Race

French bonds dropped as former Prime Minister Alain Juppe said he won’t enter the race for the Presidency, reducing the chances of anti-euro candidate Marine Le Pen being eliminated in the first round of voting.

The yield premium over German bunds widened from the lowest in more than one month amid speculation the Presidential campaign will be resolved in a May run-off between Le Pen and independent Emmanuel Macron. The euro weakened against the dollar. Key elections in the Netherlands, France and Germany this year are keeping politics as the main driver for market swings in Europe amid rising support for populist parties in the wake of Donald Trump’s victory in the U.S.

Investors are also focusing on the European Central Bank’s rate meeting later this week, where economists predict President Mario Draghi will probably maintain a pledge to keep supporting the euro-area economy even as data showed consumer-price growth hitting the monetary authority’s target last month.

  • French 10-year yield climbs 4bps to 0.98%, widening spread over German bunds to 65bps
    • France’s debt outperformed European peers last week as Macron overtook Le Pen in Odoxa poll
  • German 10-year bund yield falls 3bps to 0.33%; two-year yield drops 2bps to -0.82%
  • Euro weakens 0.2% against dollar to $1.0601, after appreciating 0.6% last week