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OAT: OAT/Bund Spread Steady Around 70bps As Macron Meets Party Leaders

OAT

The 10-year OAT/Bund spread is little changed at ~71bps today, as President Macron gathers parliamentary party group leaders for talks on how to agree on a new PM and form a gov't.

  • There is still little indication of how an agreement can be reached.
  • The leftist New Popular Front’s PM candidate (Lucie Castets) has polled poorly through the summer, reducing some OAT widening risks tied to the party’s expansionary fiscal plans.
  • While the return of political news flow may provide fresh volatility for OATs, the prevailing spread to Bunds already accounts for a degree political impasse.
  • Still, a prolonged period of political gridlock would be problematic and generate widening pressure, given France’s well-documented fiscal headwinds.

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