Yield on French government bonds falls as center-left forces in France join forces to block the far-right 'National Rally'

On July 3rd, Jinshi Data reported that the risk premium of French government bonds narrowed on Wednesday because many candidates from the French center and left-wing alliance agreed to withdraw from the second round of elections, concentrating their votes to block the far-right National Front led by Le Pen, thus making its prospect of winning a majority in the French parliament dim. More than 200 candidates from the left-wing alliance and President Macron’s party confirmed that they will withdraw from Sunday’s election and called on voters to choose the candidates who are most capable of defeating the local National Front opponent. “This strategy will greatly limit Le Pen’s chances of winning an absolute majority,” said Mohit Kumar, chief European economist at Jefferies, in a report. "As neither the far-right nor the far-left can take the number of seats required to implement extreme policies, this situation should be a short-term favorable information for the market. " The yield on French 10-year government bonds fell 2.5 basis points to 3.307%. The yield spread between French and German 10-year government bonds narrowed to 69.9 basis points, the narrowest level in a week. This spread represents the premium that investors require for holding French bonds with additional risk.