* French/German 10-year yield gap at 71 bps, widest in 3
* Far-right's Le Pen launches presidential election bid
* German Bund yields fall to near two-week low
* Conservative candidate Fillon to hold news conference
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Feb 6 Investor uncertainty about
France's presidential election took its toll on French bonds on
Monday, lifting the premium investors demand for holding French
over German government bonds to its highest in almost four
The move came after far-right National Front leader Marine
Le Pen launched her presidential bid, vowing to fight
globalisation and take France out of the euro zone.
French 10-year bond yields rose to 17-month highs while
nervous investors pushed yields on safe-haven German bonds to
their lowest level in almost two weeks.
Buoyed by the election of President Donald Trump in the
United States and by Britons' vote to leave the European Union,
Le Pen's anti-immigration, anti-EU party is seeking to tap in to
similar voter dissatisfaction in France.
Le Pen laid out her presidential election manifesto at the
weekend, pledging to curb migration drastically, take France out
of the euro zone and hold a referendum on EU membership.
France would default on its sovereign debt if it
unilaterally converted its euro-denominated obligations into new
francs following Le Pen victory, a senior executive at ratings
agency Standard & Poor's told The Economist.
Le Pen's strong showing in the opinions polls has rattled
investors at a time when conservative Francois Fillon, once the
favourite to win presidential elections in April and May, is
embroiled in a scandal over salary payments to his wife. Rising
centrist star Emmanuel Macro, meanwhile, is as yet untested.
Fillon will hold a news conference at 1500 GMT on Monday, a
source close to him said.
"The likelihood of Le Pen winning is unlikely, but the
situation in France is certainly raising fears among investors,"
said DZ Bank rates strategist Christian Lenk. "French bonds will
continue to underperform even though a lot is priced into the
France's 10-year bond yield rose 4 basis points to about
1.14 percent, its highest level in about
In contrast, Germany's benchmark 10-year Bund yield fell 2
bps to 0.39 percent, pushing the French/German
yield gap spread pushed out to 73 basis points -- its widest
level in almost four years.
Data on Friday showing tepid wage growth in the United
States also boosted demand for German bonds, overshadowing
further signs of economic strength.
German industry orders rose 5.2 percent in December, the
biggest monthly rise since July 2014, data on Monday showed.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Jeremy Gaunt)