(Bloomberg) -- Global investors are starting their own buyers’ strike in France, spooked by President Emmanuel Macron’s waning popularity.
The nation’s yield spread over Germany, a barometer for political risk, has climbed to to the highest level since the French election in 2017, when investors had priced the risk of a populist upset. The so-called “yellow jacket” protests forced Macron to back down on planned fuel-tax increases, but have sparked concerns about the impact on the domestic economy.
“Certainly, the reputation of Macron and his reforming government has been undermined, with the potential for further reforms diminishing,” wrote Ciaran O’Hagan, a strategist at Societe Generale SA who still recommends long positions on the bonds, known as OATs. “We are not reconsidering our long-term longs in OATs but do recognize that risk is up sharply just now for almost no extra reward.”
French 10-year bonds now offer a yield of 69 basis points, about 43 basis points over those of Germany. That difference is the most since June 2017.
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