Big Investors Buy Eurozone Bonds After France Sell-Off

3-line summary

• France's 10-year bond yield approached 5% this month, its highest in about 25 years, with the France-Germany 10-year spread widening to 1.4 percentage points — up roughly two-thirds since early October — amid concerns over sustainability of France's €3.5 trillion government debt, according to Investing.com. Italy's spread rose to 1.1 points. European investment-grade corporate bond spreads (ICE BofA index) moved from 0.8 points in early September to 1.0 point on Friday before easing to 0.96 points Wednesday.
• Several major investors moved to buy into the selloff: Aberdeen Investments placed a new bet on Italian government bonds outperforming German Bunds; W1M bought French corporate bonds including Axa and BNP Paribas; Ninety One increased European corporate bond exposure via high-yield indices while avoiding direct French sovereign debt ahead of elections; Schroders cut its underweight on Italian and Spanish bonds and increased exposure to European investment-grade corporates.
• French yields fell Tuesday after far-right presidential frontrunner Marine Le Pen pledged fiscal discipline, then rose again Wednesday on higher oil prices and fiscal uncertainty ahead of the presidential election; the governor of the Bank of France said ECB intervention is not needed.

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