|Published : 20 Apr 2017, 19:33:20|
French sovereign bonds gain ground
European equity market implied volatility based on the Euro Stoxx 50 index remains some way below peaks last June when the UK voted to leave the EU, according to a global media report Thursday.
This tells us that traders and investors think the first round of voting provides the prime opportunity to become a lot more bullish on France. Volatility measures are thus ripe for selling, while France’s beaten-down sovereign bonds are a buy alongside the euro.
The premium for 10-year French bonds over Bunds has been about 40 basis points in recent years, so the current spread above 70bp is enticing for traders willing to bank on a candidate from the middle ground winning.
Money has already flowed into Europe, ignoring the sight of various volatility measures straining at the leash like a half-starved whippet. Global investors have been rotating out of expensively valued US shares and buying those in the eurozone.