Macron's Risk Gamble Disrupts French Bond Market

French government bond yields have hit a four-year high following President Emmanuel Macron's snap election call, causing investor anxiety. The spread between French and German bonds widened significantly, with French 10-year yields rising while German yields fell. Concerns about potential far-right gains in parliament are affecting market stability.

The risk premium investors demand to hold French government bonds hit a more than four-year high on Friday, as the fallout from President Emmanuel Macron's gamble in calling snap elections continued.

Bond yields were down across the bloc on Friday as prices rose, but those on French debt failed to fall as much as their German equivalents, pushing the closely watched spread to 74 basis points (bps), the highest since the COVID-19 crisis in March 2020. Germany's 10-year bond yield was last down 7 bps at 2.423%, its lowest in a month.

France's 10-year yield was down 1 bp at 3.168%, up 5 bps for the week. Investors have dumped French bonds after Macron's election call, worrying far right parties could win the parliamentary election and worsen France's debt sustainability. Yields move inversely to prices.

Part of the widening has been caused by a fall in German bond yields as investors have bet central banks are more likely to cut interest rates after weaker-than-expected U.S. inflation and jobs data, and as they rush to the safety of German debt as political uncertainty rises. Italy's 10-year bond yield was last down 3 bps at 3.919% on Friday, having fallen 5 bps this week.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)