French Oat-German Bund 10-year Spread

The Oat-Bund yield spread widened out about 7 bps this past week.  Hard left candidate, Jean-Luc Mélenchon,  is making a late charge turning the first round of the presidential election into a 4-way horse race.    Though  Le Penn and Macron are ahead in the polls and favored to make the second round,  their leads are just outside the margin of error.   And 33 percent of French voters are still undecided.

A  Mélenchon-Le Pen second round run-off would really spike volatility as the center would be up for grabs,  increasing the probability of a Le Pen presidency and thus an existiential threat to the Eurozone and EU.

The favourites to make the second-round runoff on 7 May remain far-right Front National candidate Marine Le Pen and the independent centrist Emmanuel Macron. But with up to one-third of France’s 47 million voters undecided, and another 30% so disillusioned with French politics that they say they will abstain, the field is still wide open.

Two months ago any suggestion that Mélenchon, head of La France Insoumise (Unbowed France), could be a serious contender for the Elysée would have been thought laughable. Now it is no joke. Mélenchon’s popularity is running level with the beleaguered, scandal-hit Fillon in some polls, higher in others.

Le Monde says France is in the unusual situation of having four presidential candidates, any one of whom could win. Like Le Pen, Mélenchon is appealing to young voters with his hologram meetings, his upbeat election messages and his entertainingly forthright approach to televised debates. – The Guardian

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