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The euro jumped by 1% this morning against the US dollar to 1.0836, while defensive assets dropped

The French OAT- German Bund yield spreads tighten by 16bps as market’s pricing in the likely outcome of Macron winning the elections as many French political leaders now support him in an effort to block the Far-right Le Pen.

The euro jumped by 1% this morning against the US dollar to 1.0836, while defensive assets dropped. Gold declined from US$1285 on Friday to US$1271 this morning, while 10-yr Treasury yields rose from 14bps to 2.3%.

After the second round of the presidential elections, the next decisive step for France will be to elect the Parliament in a month and a half from now. It is still unclear how Macron will win a clear political majority without joining forces with both the Socialist and Republicans groups.

The uncertainty around the ability of Macron to gain a majority of seats in the Parliament to pass on his reforms will likely continue to weigh on the French-German government bond spreads in the next 6 weeks. We believe in a gradual tightening of the spreads in the weeks to come.

Morgane Delledonne , April 24

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