LONDON Feb 14 The volume of French government
bonds changing hands has doubled this month, as uncertainty
surrounding the upcoming election has lifted the premium
investors demand for holding French over German debt to its
highest in four years, figures showed on Tuesday.
Activity in French corporate bonds has been just as
frenetic, with average daily volume so far in February on track
to break January's record, according to Trax, a subsidiary of
Average daily trading volume for French government debt so
far this month stands at 16.5 billion euros, Trax figures show.
That's up 47 percent from January's average of 11.2 billion
euros, and double the daily average of 8 billion euros over the
January's total volume was 236.1 billion euros, up 40
percent from the monthly average last year, Trax said.
French bonds have underperformed Italian, Spanish and German
bonds so far this year, according to Goldman Sachs analysts. The
10-year yield spread over ultra-safe German bonds nudged 80
basis points this month, the highest since November 2012.
Investors are nervous that far-right leader Marine Le Pen
could win this spring's election. She is running on a platform
of populism and protectionism, and has pledged to take France
out of the euro.
Bank of America Merrill Lynch's latest survey of global fund
managers published on Tuesday showed that 36 percent of those
polled said euro disintegration risk from Europe's election
calendar this year posed the biggest tail risk event for global
"We recommend a cautious approach for now, but we believe
idiosyncratic concerns about French politics are getting
overblown," Societe Generale rates strategists said in a note on
In French corporate bond trading, average daily volume last
month hit a record 1.2 billion euros, Trax said. So far this
month, average daily volume stands at 1.4 billion euros.
Trax provides post-trade services for around two-thirds of
all fixed-income transactions in Europe.
(Reporting by Jamie McGeever; Editing by Dominic Evans)