“Not your usual French drama”
TLT•Barclays strategists said France’s political and fiscal risks could make its bonds more volatile as the country approaches the 2027 presidential election. The 10-year French OAT yield rose 2.5 basis points to 4.684%, its highest since 2008.
1. French bond risks
France is approaching a pivotal 2027 presidential election while its public finances need repair, Barclays strategists said, arguing bondholders may be less willing to overlook future risks. The 10-year OAT yield rose 2.5 basis points to 4.684%, its highest since 2008.
2. Volatility and deficits
Barclays said French bonds’ sensitivity to yield moves relative to German bonds has overtaken Italy’s, making them trade more like higher-risk peripheral bonds. The strategists expect large deficit pressures to extend into 2027 and said the adjustments France needs to its primary balances are greater than elsewhere.
3. Political uncertainty
Barclays said fragmented voter support and the collapse in support for traditional centrist parties could make the path ahead more volatile. The strategists said markets may not repeat earlier episodes in which risk premia around French elections rose and then fell.
