(Bloomberg) -- A very small band of investors is starting to snap up French debt after three months of volatility turned off most funds.Most Read from...
-- A very small band of investors is starting to snap up French debt after three months of volatility turned off most funds. Jupiter Asset Management and hedge fund Mount Lucas Management are among those looking past the country’s recent political turmoil — it currently doesn’t even have a prime minister — and swelling pile of public debt, to buy its long-term government bonds . That’s a wager based on the view that a selloff has been overdone since surprise elections were called in June.
French President Emmanuel Macron has prolonged discussions this week on appointing a prime minister after rejecting Lucie Castets, the candidate representing the New Popular Front leftist alliance, which won the largest number of seats in the election but not enough to govern alone. Its pledges for vast public spending and higher taxes have spooked investors.
Still, it’s not clear Macron can easily find a prime minister who would have the cross-party support that he said the NPF and Castets lacked to withstand no-confidence votes in parliament. Some members of the left-wing alliance have indicated they could agree to not censure a more centrist figure, on the condition there is a clear shift away from Macron’s pro-business policies.
“Budget discussions could create renewed tensions,” said Ales Koutny, head of international rates at Vanguard, which is using short positions on French bonds to hedge its long bets on Spanish and Greek debt. “We think the current spread is fair. We need some resolution regarding the budget and no increase in the deficit to make us reassess our view.”
Some funds pointed to Spain as a better option. For those willing to bet on a recovery in France, the trajectory of Italy may offer a positive model. Perennially seen as risky, given inflated debt and fractured coalition politics, right-wing populist leader Giorgia Meloni’s government has pursued broad restraint since taking power in 2022. Now it’s seeking cost cuts to fill a hole in the budget.
Emmanuel Macron Government Bonds Jupiter Asset Management Bloomberg Mark Nash French Inflation Debt Burden French President France Asset Management Risk Premium European Central Bank
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