###On Wednesday, French redemptions and.........>

OAT: ###On Wednesday, French redemptions and coupon payments are close to

E50bln. Does this tighten French spreads to Germany?

- Such large cash flows happen twice a year on Apr 25 and Oct 25 and are always

amply telegraphed by analysts. 

- MNI assessed the impact upon German-French spreads at 2, 5, 10Y and 30Y

maturities since 2011. 

- The chart is here: https://tinyurl.com/ycutvzsr

- The y-axis shows the number of trading days from the close on the day of the

big cash flow. Thus, zero would be this Wednesday's close.

- The x-axis shows the average German-French spread change relative to that day.

Logically, the line should start 3 days out from the 25th high and then decline,

rising again the aftermath of the payment. To calculate the average, we took

periods of quiet spreads, i.e. not during the election result in April this year

and also have excluded Oct 2011 and Apr 2012. 

- There is no evidence that OATs outperform leading into the 25th but they do

underperform afterwards.