French 10-Year Bond Yield Premium Set for Widest Since 2017

(Bloomberg) -- French bonds fell Thursday, driving yields over safer German peers to the highest level in seven years amid concerns Marine Le Pen’s far-right National Rally party will usher in looser fiscal policies if it wins upcoming elections.

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The spread between French and German 10-year yields widened seven basis points to 68 basis points, the most since 2017 on a closing basis. The moves extend a sharp selloff triggered by President Emmanuel Macron’s decision on Sunday to hold a snap vote.

Polls show the National Rally — which has previously supported policies such as cutting sales taxes and reducing the retirement age — has a substantial lead going into the first round of voting on June 30.

S&P Global Ratings last month downgraded the nation’s credit score, saying the budget deficit will remain above 3% of gross domestic product through 2027. Moody’s Corporation said in a note Monday that snap election increases the risks to plans to plug the holes in the budget.

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