Will France Launch The Molotov Cocktail?

The Oat-Bund 10-year spread came in almost 10 bps last week.  The Euro rallied a little over 1 percent.

A disillusioned and highly undecided French electorate head to the polls tomorrow to choose the two candidates (unless one wins an unprecedented 50 percent) for the May 7th second round election, which will decide the country’s next president.    The question is in the privacy of the polling booth will the disaffected marginal French voter decide to launch a political Molotov cocktail, as the Americans did in November, at the system that they deem has failed them and cast their vote for both extreme candidates –  the hard right, Marine Le Pen,  and the hard left, Jean-Luc Mélenchon?

Possible,  but unlikely, in our opinion.

However, the latest polling puts all four candidates almost within the margin of error and with 25 percent of the electorate undecided it makes for much uncertainty and sets the stage for high drama on a Sunday night in Paris.

The first round of voting is set to be a closely-fought race, with the latest poll from PrésiTrack OpinionWay / ORPI for Les Echos and Radio Classique putting the top four candidates within just four points of each other.

Emmanuel Macron, the centre-right pro-EU candidate, leads the poll with 23 per cent.  Marine Le Pen, who has vowed to freeze immigration and end the Schengen agreement, is just one point behind.

Francois Fillon is just behind on 20 per cent, with far-left firebrand Jean-Luc Mélenchon is on 19 per cent.

…With a margin of error of up to 2.2 per cent, and many French voters still undecided, it is possible that any of these four candidates could win the first round of voting.  – Sunday Express

Our sense is Le Pen will probably receive a slightly higher than expected vote due to the “Bradley Effect” and Macron will finish close behind.   This is our educated guess.   Only a guess and could cause a little volatility before French and European financial assets begin to rise — probably by a lot — as they price in a Macron victory in the second round.

Place your bets.

Oat-Bund Yield Spread

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