French Oat-German Bund 10-year Spread

The spread on the French 10-year and German 10-year widened almost 10 bps this week and is now approaching 2014 highs.  François Fillon prospects in the betting markets dropped like a stone in the past week over the scandal his wife having a “fake job” and on the government payroll and new “corruption” charges are beginning to surface.

The nominee for the centre-Right party, Les Républicains, was tipped to win the French presidential election after winning primaries in November – most likely by winning a second round battle against far-Right rival Marine Le Pen.

But his campaign hit huge turbulence last week over a report in Le Canard Enchainé, the satirical weekly, that his Welsh-born wife had been paid €500,000 (£426,000) as parliamentary assistant to her husband and his replacement, when she had previously made it clear she steered clear of his political life.  – Telegraph

The nomination of the hard left Socialist, Benoit Hamon,  as their candidate for president bolstered Emmanuel Macron chances.

By choosing the 49-year-old traditional leftist Hamon over Valls, they give Macron a big group of middle-ground voters to aim at and a better chance of beating his close rivals on the right and far-right. – Reuters

We still think it will be Fillon and LePenn in the first round on April 23rd and Fillon takes the presidency on May 7th.  But the election is now turning into a horse race between Macron, Fillon, and Le Pen.   Could be wrong, but one thing is for certain,  volatility will pick up in the next few months.  Macron has now become a hedge against a Le Pen victory.


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