Traders panic over prospect of Marine Le Pen victory Business

Market fears that Marine Le Pen will cause an upheaval in the French presidential election are growing after a key risk gauge hit its highest level since Covid struck.

Tightening polls prompted investors to ditch French government debt, widening the gap between its bond yields and German bunds ahead of Sunday’s vote.

The spread between German and French bond yields is seen by investors as a key measure of political risk in Paris and has widened significantly over the past week.

Fears are growing that far-right Le Pen will win a surprise victory after a poll put it ahead of Emmanuel Macron in the second round.

France’s 10-year bond yield jumped 23 basis points this year to a seven-year high of 1.25pc, while Germany’s 10-year yield climbed 14 basis points at 0.68 pc. This is the widest gap since March 2020.

Economists have warned of big moves in the euro and French borrowing costs if Ms Le Pen is elected president.

Jessica Hinds, Europe Economist at Capital Economics, said: “Investors have largely ignored the risks of a Le Pen victory until this week. If its momentum in the polls continues to build, we expect the pressure on French financial assets and the euro to intensify.

“And if it were to win, the euro could fall towards parity with the dollar and the yield on French government bonds could increase towards the level of Italian government bonds.”

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This notice was published: 2022-04-08 11:54:49

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