HALISTER1: Goldman Sachs Recommends Selling French Bonds Into Election

Goldman Sachs Recommends Selling French Bonds Into Election

(Bloomberg) -- Recommend going short June OAT futures (OATM7) at 147-72, for an initial target of 144.00, and stops on a close above 150.00, Goldman Sachs strategists including Francesco Garzarelli write a note to clients.
  • A victory by a moderate reformist presidential candidate (Fillon, Macron), which is the base case at the bank, would result in a narrowing of French bond spreads but is seen offset by a selloff in core rates
  • “Fair level” of 10-year spread to bunds is in the region of 30bp-40bp, from 70bp currently, according to Goldman
  • Would expect French bond spreads and yields to come under upward pressure if the first round of election were to result in a strong showing of anti-establishment candidates (Le Pen, Melenchon)
  • By contrast, U.S. Treasuries may instead rally on the event, on the back of flight-to-quality flows
  • NOTE: Sell or Hedge France Is the Pre-Election Theme

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Francesco Garzarelli (Goldman Sachs Group Inc/The)

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