/LINKERS. Breakeven have risen across the.......>

OAT: /LINKERS. Breakeven have risen across the curve but most significantly at

the front end. Responding to questions on the 2Y French breakeven inflation

Strategist at Credit Agricole in Paris, Jean-Francois Perrin comments that in

rough terms "seasonal carry can be blamed for 13bp and is therefore, purely

optical (FR CPI ex tob was -0.36% MoM in July, it's accrued in September,

duration of OATi 19 is about 1.8Y)". He added that oil could be blamed for about

10bp more of the breakeven move.

- More interesting is what's happening further up the curve as Livret A flows

remain strong with a E13bln inflows on a 12 month basis. He posits "probably

because other products are getting less attractive (lower yields, regulatory

uncertainty). However, the French Government announced it will keep the rate at

0.75% for two years, irrespective of the formula. To us, it looks like a

disincentive for banks to hedge French inflation risk". 

- With a short-term breaking of the link between French inflation and Livret A

rate Perrin recommended shorting FRF inflation swap against EUR inflation in the

5Y sector of the curve.