Marine Le Pen has relaunched her presidential campaign, giving investors another reason to avoid French government bonds, according to Jin10. Institutions believe France's deteriorating fiscal situation, combined with the presidential election that may worsen political divisions, further weakens the outlook for a country already burdened with high debt and weak economic growth. Polls show Le Pen currently leading the race to succeed current President Emmanuel Macron in next year's election. Her rising support will also make it harder for Prime Minister Lekorni to control fiscal spending.
MFS Investment Management portfolio manager Annalisa Piazza said Le Pen places less emphasis on fiscal discipline, and the risk is that the yield spread between French and German bonds will remain elevated for longer. Barclays global head of research Ajay Rajadhyaksha said the market is concerned about Le Pen's populist fiscal policies, especially with France's debt-to-GDP ratio already near 120%. He expects Le Pen's campaign to further complicate France's fiscal consolidation.
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