Following French president Emmanuel Macron’s unexpected snap parliamentary election on 9 June, the median bid/ask spread in French treasury bonds was at its widest this year.
OATs (Obligations assimilables du Trésor), government bonds issued by Agence France Trésor (French Treasury) and with maturities at issue of 2 to 50 years, are usually issued by auction. Since the beginning of May, the median Bid-Ask Spread for CP+ in OATs >2yrs bonds, was widest on the 12 June and the 5 July, according to CP+, MarketAxess’ pricing engine for global fixed income securities, covering the period from May up to the close of markets on Monday 8 July.
The median CP+ bid-ask spread in OATs >2yrs bonds has been at its widest this year: first, following the snap French legislative election called on June 9th, and second, the week commencing 7 July, following unexpected gains by the Left wing bloc.
Macron called the election after his centrist alliance was beaten in EU parliamentary elections by the far-right National Rally.
A market source told The DESK the snap election saw some increased risk premium for French or related assets, whether as higher Oat/German Bund spread for sovereign debt or (though more short-lived) higher credit spread for corporate bonds, more specifically so for financials.
There was also an increased bid/ask spread, though mostly for corporates, while OATs quickly returned to usual bid/ask after the early hours post-snap election call by the French President, The DESK understands.
Following the result, which saw neither the far Left or far Right gain a majority, market sentiment is one of relief, the trader told The DESK, as evidenced by recent new issuance by French names. Nonetheless, none of the major blocs have a majority and political uncertainty remains.
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