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Zut alors! French bonds and the euro under pressure on more political jitters

The gap between the 10-year French and German government bond yields widened to 65 basis points – a five-day high – on Monday, as political uncertainty returned to France.

Meanwhile, the euro has dropped against the U.S. dollar by nearly 0.4 percent to about 1.0581 following news that the former French Prime Minister Alain Juppe has said he has no intention of replacing the beleaguered presidential hopeful Francois Fillon on the Les Republicains ticket.

There had been rumors Fillon would be replaced given that his position in the race has been significantly weakened by investigations into misuse of public funds.

However, at a press conference Monday morning Juppe clarified he would not run for the presidential seat.

In 2004 Juppe was sentenced to an 18-month suspended sentence and banned from public office for 10 years after he was found guilty of corruption in a case concerning Paris city funds being used to pay political allies.

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Juppe "is also more of a risk than the polls would suggest, not least because he has a criminal conviction for a similar offence to that which Fillon is now being charged," Rainbow Murray, Associate Professor, Queen Mary University of London told CNBC on Monday.

"He also lost the primary by a significant margin last November. So within his own party he is not that popular and there's also the problem that Fillon has been quite insistent that he won't stand down.

"So it's going to be difficult to bring any new candidate while the current one is tenuously holding on."

Recent polls had shown that if Juppe would replace Fillon, the conservative party would win the election.

"The public is quick to forget and if he becomes the candidate again they will be quick to remember, because it will be the new big story," Murray said.

She added that there would also be additional hurdles for Juppe, not only technical issues related to party's funds, but also to come up with a manifesto able to build enough momentum with only six weeks to go until the first round of the election.

Polling numbers released by Opinionway on Monday showed that the far-right candidate Marine Le Pen remains on track to win the first round of the election with about 27 percent of support, compared to 24 percent given to the centrist Emmanuel Macron and 19 percent to Francois Fillon.

But in the second and final round of the election, when only two candidates try to win the presidential seat, Emmanuel Macron would beat Marine Le Pen with 60 percent of the votes, the same survey suggested.

Macron, who is running as an independent, said on Monday that he wanted bank and insurance capital rules to be established by European Union finance ministers instead of regulators. Macron, a former investment banker, who served as economy minister for the socialist party, believes that regulators are too focused on reducing risks, which is preventing further financing into the economy.

The first round for the French presidential election happens on April 23. The second runoff takes place on May 7.

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