France’s 10-year bond spread over Germany reached a 14-year high of nearly 1.6 percentage points, prompting some investors to consider re-entering the market. Mediolanum International Funds Ltd, Amova Asset Management, and Aegon Asset Management are among firms adjusting positions or waiting for clearer buying signals. Steve Williams of Amova, a Japanese firm with over $330 billion in assets, expressed increased confidence in French OATs, having bought during July’s dip. Niall Scanlon of Mediolanum closed an underweight position, citing oversold fundamentals, though he remains cautious on going overweight.
Open interest in French bond futures dropped almost 5% on Monday, signaling short-covering. The selloff was fueled by fiscal concerns, a draft budget, student protests, and the upcoming April presidential election. Marine Le Pen’s deficit-cutting pledge offered brief relief, but yields rebounded Wednesday, rising over 16 basis points.
Irina Kurochkina of Aegon waits for volatility to ease, while Vera Fehling of DWS Group sees current pricing as reflective of risks, noting the record OAT-BTP spread as a buffer. Elliot Hentov of State Street Investment Management emphasizes public acceptance of austerity as a key trigger for renewed investment.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing