Mike Bell, head of market strategy at RBC BlueBay Asset Management, said in an interview with Reuters that whether leading candidates in France's presidential election, especially poll leader Marine Le Pen, pledge to raise the retirement age will determine how much French government bond yields rise from here. French government bonds have been sold off and yields have surged amid the country's fragile fiscal position and political uncertainty surrounding the presidential election in the first half of 2027, with pensions set to account for 436 billion euros next year, or 14 percent of GDP, making them the largest item of public spending. Bell warned that if the odds rise of a candidate who would keep the retirement age unchanged winning, the yield gap between French 10-year government bonds and German bunds could widen to as much as 200 basis points, noting the spread exceeded 150 basis points on the 2nd, the highest level since the second half of 2011. RBC BlueBay, which manages 598 billion dollars in assets, holds French government bonds but has deliberately avoided increasing its allocation, and Bell said that with time still to go before the presidential election, to be held from April 18 to May 2, 2027, it would take "quite a lot of courage" to add to investments. He also pointed to the possibility of a clash with the European Central Bank if Le Pen wins, analyzing that the ECB's transmission protection instrument is available only to countries that comply with EU fiscal rules, and France does not currently meet that condition.
RBC BlueBay's market strategist comments on French bond yields and its own cautious stance on French government bonds; no clear directional impact on the firm itself.
