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EGBS: French Political Speculation Spurs Further OAT/Bund Widening

EGBS
BulletFixed Income Bullets

Speculation surrounding the possible resignation of French President Macron triggered a renewed sell-off in OATs, alongside a bid in German paper, as EGB spread moves dominated.

  • The moves have since faded from extremes after the Elysée denied the speculation.
  • The 10-year OAT/Bund spread is above 60bps and tested ’23 wides during today’s vol.
  • OATs were underperforming before the rumours did the rounds, with Moody’s noting that France’s snap election was negative for the country’s credit rating, a sentiment echoed by Morningstar DBRS yesterday.
  • Bunds are +15 at 129.80, after reaching knee-jerk highs of 129.98.
  • Meanwhile, OAT futures are -60 at 122.70, hitting the lowest level seen since October 2023.
  • The French cash curve has bear steepened, with the 2s10s curve hitting multi-week steeps.
  • The German curve has lightly bull steepened.
  • 10-year peripheral spreads to Bunds have widened alongside OATs, with the BTP/Bund spread around 5bps wider at 145bps at typing.
  • While political matters continue to dominate regionally, wider market focus remains on tomorrow’s US CPI data and FOMC decision.
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Speculation surrounding the possible resignation of French President Macron triggered a renewed sell-off in OATs, alongside a bid in German paper, as EGB spread moves dominated.

  • The moves have since faded from extremes after the Elysée denied the speculation.
  • The 10-year OAT/Bund spread is above 60bps and tested ’23 wides during today’s vol.
  • OATs were underperforming before the rumours did the rounds, with Moody’s noting that France’s snap election was negative for the country’s credit rating, a sentiment echoed by Morningstar DBRS yesterday.
  • Bunds are +15 at 129.80, after reaching knee-jerk highs of 129.98.
  • Meanwhile, OAT futures are -60 at 122.70, hitting the lowest level seen since October 2023.
  • The French cash curve has bear steepened, with the 2s10s curve hitting multi-week steeps.
  • The German curve has lightly bull steepened.
  • 10-year peripheral spreads to Bunds have widened alongside OATs, with the BTP/Bund spread around 5bps wider at 145bps at typing.
  • While political matters continue to dominate regionally, wider market focus remains on tomorrow’s US CPI data and FOMC decision.