French Bond Selloff Seen Consistent with Domestic Political Uncertainty

Dow Jones
Oct 06

0505 GMT - The selloff in French government bonds is overdone relative to the state of public finances in the first half of 2026, but it is consistent with rising domestic political uncertainty over next year's fiscal plans, Pantheon Macroeconomics' Claus Vistesen and Melanie Debono say in a note. "French government bonds are in a world of pain, caught in a perfect storm of rising domestic political uncertainty and social tensions and a sell-off in global bonds, adding to risk premiums in developed markets," the economists say. The fiscal trajectory alone does not justify an OAT-Bund spread at 140 basis points, but political uncertainty does; investors are unlikely to give lawmakers the benefit of the doubt ahead of presidential and likely legislative elections next year, so pressure on OATs will persist, they say.

 

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