Generali AM: “the Franco-German spread recently widened by 15 basis points” – 02/12/2024 at 3:05 p.m.

(AOF) – “The spread between French bonds and German bunds recently widened by 15 basis points to reach 90 basis points. This increase is the result of an escalation of tensions between the National Rally party (RN) and the government regarding the 2025 budget, which must be approved before the end of the year”, explains Mauro Valle, head of fixed income at Generali Asset Management in relation to the political tensions around the budget 2025 in France.

It seems unlikely that future developments will result in a narrowing of the French rate spread. If the government of Prime Minister Michel Barnier gives in to Marine Le Pen's demands, the finance bill for 2025 will provide for a deficit above 5%, the government's objective. Furthermore, Michel Barnier could invoke article 49.3 to have the law adopted without the approval of Parliament, at the risk of provoking a motion of censure.

“In both cases, the spread should remain within the range observed in recent days over the coming weeks, depending on political developments, with a significant risk that the market will test the threshold of 100 basis points from January, when the financing activity resumes”, specifies Mauro Valle.