Germany’s 2-year yield plunged to a record low on Wednesday. A moderate bid pushed the yield down more than 4 basis points to -92.4 bps as traders pile into safety amid the uncertainty surrounding the French election.
A poll conducted by OpinionWay on Monday showed anti-euro candidate Marine Le Pen’s first round support rose to 27%, compared to 20% for both independent front-runner Emmanuel Macron and Republican Francois Fillon.
And things don’t seem to be going too well for Le Pen’s competition. In a blog post on Wednesday, Marc Chandler wrote, “Macron appears to be doing a good jump of shooting himself in the foot, allowing Fillon, under a cloud of scandal, to recapture second place in the polls.”
The scramble for safety in Europe has caused the spread between the US 2-year and the German 2-year to widen to about 213 bps, the widest it has been since 1999 (the euro didn’t enter circulation until 2002).
Additionally, none of this has been kind to the euro as the single currency briefly slid below the 1.0500 level for the first time since January 11. “Of the sixteen sessions this month, counting today, the euro has risen in four, and two of those were last week,” said Chandler.
Markets are clearly getting worried and starting to price in the possibility of a Le Pen victory. The first round of the French election takes place on April 23 and the second round is set for May 7.
