French Bond Investors Skeptical That Election Risk Is Over

Tyler Durden's picture

Bond investors are far from convinced that the risks surrounding the French election are over despite the broader market exuberance following the outcome of the first round.

French 2Y yields have only corrected about half of the risk premium over German 2Y yields since the election (and in fact are widening out today)

 

Furthermore, as Bloomberg details, open interest, a measure of the number of contracts outstanding, has dropped only 10 percent so far this week even as French government bond futures surged after the race for presidency narrowed to Emmanuel Macron and Marine Le Pen.

A decline in open interest amid a rally in an asset typically suggests short-covering rather than new positions being added... but the modest size of the drop suggests few investors are relieved enough to pile back into 'still cheap' OATs.

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hxc's picture

Your mom. Bond markets are so rigged and littered with standard human imperfection that there is no way that the silly new keynesian/new monetarist efficient markets hypothesis makes any sense with any set of historical data. This is a free marketeer here.

BorisTheBlade's picture

'Markets' are a policy tool. Efficient markets hypothesis is a window dressing when there's such a huge concentration of capital. Any asset class can be pumped and subsequently dumped depending on the final purpose, examples are abundant.

wee-weed up's picture

Ha! The false exuberance of slowly boiling Frogies.

SolidAssets's picture

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quadraspleen's picture

Why anyone with more than microscopic intelligence would buy 20Y notes from any government is beyond me. They even write it on the tin: Past performance is no guarantee of future profits.

I'd be amazed if any western gov hasn't defaulted by then.

Roll up, Roll up: Free haircuts all round!

French bonds? Lulz