Emmanuel Macron Plays Fast and Loose With Investor Faith

French President Emmanuel Macron has taken a serious gamble in calling early parliamentary elections. The consequences of putting politics above economic stability could be profound. Financial markets don’t like unnecessary or unexpected political volatility, especially at the core of the European Union. The electorate only gets to vote at elections; financial markets get to vote every day, and so far they’re giving a thumbs down to Macron’s ploy.

Foreign bond investors used to favor a "bund plus" strategy, owning French and German government debt with the pair forming the bedrock of the EU, but with the former offering a modest yield premium. Monday’s jump in the gap to the highest this year shows portfolio managers are concerned about the fiscal direction Paris is headed in.