The bond market has fully priced in France's deficit risk; Goldman Sachs predicts that the France-Germany bond yield spread will eventually converge.
Goldman Sachs analysts pointed out in their latest report that the current bond market has fully priced in the risk of France's deteriorating fiscal deficit. Unless the probability of a re-election increases, the yield spread between French and German government bonds will eventually tend to narrow.
“Although we believe that the risk-reward ratio for narrowing German government bond swap spreads is currently unattractive, the potential for risk spillover to other sovereign spread markets or outside German government bonds remains limited,” the analysts added.
Tradeweb data shows that as French Prime Minister François Bayrou announced a confidence vote to be held on September 8, the 10-year French-German bond yield spread once widened to a new cycle high above 80 basis points last week, before narrowing to below 80 basis points later in the week.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Did top universities also get burned? Harvard invested $500 million heavily in bitcoin right before the major plunge
Harvard University's endowment fund significantly increased its holdings in bitcoin ETFs to nearly 500 million USD in the previous quarter. However, in the current quarter, the price of bitcoin subsequently dropped by more than 20%, exposing the fund to significant timing risk.

The Structural Impact of the Next Federal Reserve Chair on the Cryptocurrency Industry: Policy Shifts and Regulatory Reshaping
The change of the next Federal Reserve Chair is a decisive factor in reshaping the future macro environment of the cryptocurrency industry.

Tether: The Largest Yet Most Fragile Pillar in the Crypto World

In-depth Analysis of the Ethereum Fusaka Upgrade: Core Changes and Ecosystem Impact

