PARIS: French bonds are being traded at volumes not seen since the eurozone crisis as the tumultuous presidential election race has divided investors over whether France will deliver the world’s next populist upset.
Hedge funds in New York say investors are becoming increasingly concerned at the possibility that far-right candidate Marine Le Pen, whose National Front party has pledged to pull France out of the euro, will win when voters go to the polls in late April.
“It’s hard to see Le Pen win, but no one’s trusting the polls after Trump and the Brexit referendum,” said Said Haidar, chief executive of Haidar Capital Management in New York.
On average, about €16bn of French government bonds has been traded each day in February — double the €8bn average recorded last year by Trax, a data service provider. The volumes are similar to levels seen during the 2010-12 eurozone sovereign debt crisis, when fears that insolvent member states would trigger the collapse of the currency union dominated markets.
French debt is now priced in markets as equivalent to Ireland’s — a far smaller economy with a lowlier rated bond. The difference between French and German bonds, judged the safest in Europe, hit a four-year high last week.
Late last year, billionaire American hedge fund manager David Tepper also advised investors to bet against French government bonds, describing them as expensive in comparison to Bunds.
Klaus Regling, managing director of the eurozone’s rescue fund, said Euroscepticism had become one of the biggest risks in the eyes of the financial markets.
“It is important not to give the impression that Europe is in perpetual repair mode,” he said on Thursday at the Munich security conference. “The crisis is well behind us, and Europe has come out of it stronger than before.”
