French Economic Uncertainty at All-Time Highs

The rise in European government bond yields has been widespread since lows in early fall last year, led by Italy and (now) France.

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As investors turn to the relative safety of bunds, the spread between French and German yields (light blue line below) has risen to multi-year highs. In addition, the economic policy uncertainty index for France (red line below) soared to an all-time high in January.

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With elections looming and expectations for uncertainty to remain elevated, the relative selloff in French bonds could have quite a bit further to go–just take a look at the spread back in 2011/2012.

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