European SSAs: Widening in French agency spreads is overdone - Rabobank

In view of the analysts at Rabobank, the prospect of a far right, anti-Euro French president has increased government and agency spread volatility and believe these moves are overdone and highlight the factors supporting the French agency market beyond the elections but they do however advocate a tactical approach to trading these names leading into the first round.

Key Quotes

“The market was wrong on Brexit and wrong on Trump. The prospect of a far right, anti-Euro French president in the shape of Marine Le Pen is clearly not a risk that many are willing to take with the past several weeks witnessing a significant rise in French government and agency bond volatility.”

“Though we remain cautious trading French debt in the lead up to the first round of the Presidential election (April 23), from a fundamental, medium term perspective we believe the widening in French agency spreads is overdone.”