Another Twist in the French Election?

French bonds dropped as the nation’s election campaign took another twist after Socialist Party presidential candidate Benoit Hamon said he’s holding further talks with far-left candidate Jean-Luc Melenchon about a potential single candidacy.

A merger could bring about a showdown with Marine Le Pen’s anti-euro National Front, with the latest polls showing the combined vote share of the two candidates would see them qualify for the second round of voting in May. The yield difference between French and German 10-year bonds widened the most in a week, while the nation’s stocks and the euro dropped, after Hamon made the comments in an interview with France Info radio.

“This is clearly not a positive for French bonds,” said Kim Liu, a strategist at ABN Amro Bank. “It increases the odds of a Le Pen victory, with French bonds already being very vulnerable to political risks. It’s too early to call if this is a game changer as we do not know how serious the merger talks are, but certainly this is not something the market is waiting for.”

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.