How the French bond trade backfired on investors (opens the source in a new tab)
- Hedge funds piled into leveraged bets on French debt over the summer, figuring French politics wouldn’t get much rockier.
- A widening poll lead for Marine Le Pen and a poorly received budget plan sparked selling; short-term yields swung up to 0.40 points over two days.
- France’s €3.5tn government bond market is Europe’s largest, and foreigners own more than half of it.
- 1.55 pts
- France–Germany 10-yr gap
- 1.81 pts
- record gap, Nov 2011
Why it matters Crowded trades exit through a narrow door.
Other side PGIM’s Robert Tipp says forced selling, not a change in France’s creditworthiness, drove the rout, and the ECB ultimately backstops eurozone bonds.