FRANCE: OI Points To Fresh Net Long Setting During Tuesday’s OAT Tightening

Yesterday’s rally in OATs and move higher in open interest point to net long setting on Tuesday. The tightening of OAT/Bund spreads probably added some short cover to the equation given pre-election positioning.

• Meanwhile, the lower close in CAC 40 futures and fall in open interest points to net long cover in that contract.
• A reminder that OAT tightening and a recovery from intraday lows in the CAC 40 came as odds of an RN lower house majority reduced further.
• As we noted earlier, a Le Monde tally shows 221 candidates dropping out of the second round of the French legislative election, as the leftist alliance and Macron’s Ensemble try to limit right-wing RN gains via a “republican front.”
• While this agreement lowers the chances of an RN majority, the inherent uncertainty provided by a hung parliament means that French assets are anything but a one-way bet at this juncture.