French-German Bond Spread Narrows as Macron Wins Debate: Chart

The spread between French and German 10-year bond yields has narrowed to a three-month low after centrist French presidential candidate Emmanuel Macron emerged the victor in Wednesday’s televised election debate with Marine Le Pen. The yield gap dropped to 45 basis points, down from a four-year high of 84 basis points in February. Still, in the medium term investors should go short on French bonds as the prospect of an unfavorable parliament may weaken Macron’s power to pass reforms, Rabobank strategists led by Richard McGuire wrote in a client note.

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