French-German yield gap hits 1-month low as French poll puts Macron in lead

The gap between French and German 10-year government bond yields fell to its lowest in a month on Friday after a poll showed, for the first time, Emmanuel Macron beating the far-right Marine le Pen in the first round of France’s presidential election.

Having widened to as much as 84 basis points last week, levels last seen in late 2012, on concern about Le Pen’s popularity, the premium investors demand for holding French 10-year government bonds over their German equivalents narrowed to below 59 basis points .

The spread later tightened to less than 58 bps.

The euro also climbed, hitting the day’s high of $1.0541 and reaching an almost four-week high against a weaker pound at 86.25 pence.

Macron would win 27 percent of the vote in the April 23 first round followed by Le Pen at 25.5, the poll showed, leaving conservative Francois Fillon eliminated at 19 percent.

However, if Fillon, whose campaign is unravelling as he battles allegations of state payments to family members, withdrew, then fellow conservative Alain Juppe would take first place with 26.5 percent of the vote if he ran.

In that scenario, Macron would just make it to a May 7 runoff against Juppe, edging out Le Pen with 25 percent of the vote to 24 percent for her.

Stocks in French banks BNP Paribas and Societe Generale gained, and were last trading up 1.8 percent, among top gainers on France’s CAC 40 index.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell