Merkel’s euro crisis: German bond market yields fall as predictions of Le Pen victory grow
MARKETS are reacting to the potential of a “political shock” as uncertainty in Europe continues over the forthcoming French elections.
MARKETS are reacting to the potential of a “political shock” as uncertainty in Europe continues over the forthcoming French elections.
By SIOBHAN MCFADYEN
Express.co.uk
Sat, Feb 25, 2017
And it appears it is pricing in a potential Front National Marine Le Pen victory which is having a knock-on effect on German bonds.
German short-dated government bond yields fell to record lows on Friday, recording their biggest weekly drop since 2011.
While polls currently see Mrs Le Pen, 48, gaining ground on her opponents in her bid to become the first female French president, she is forecast to lose the run-off vote.
The German drops contrasted a rise in yields for French government bonds after polls said surveys indicated that Le Pen could poll as high as 40% in the second round of Presidential elections.
However market reaction appears not to support the idea that Mrs Le Pen will lose.
“The short end of the German yield curve is now completely independent from all the macro moves, ECB policy and doesn’t really correlate with the long end of the curve either,” said Peter Schaffrik, head of European rates strategy at RBC Capital Markets.
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