French bond yields widened their gap against German bunds on Tuesday morning as opinion polls showed increased uncertainty regarding who will become the next president of France.
The French 10-year bond yield rose 2.5 basis points in early Tuesday trade to 0.93 percent, while German Bund yields moved slightly lower at 0.18 percent. The gap between the two is close to a six-week high, Reuters reported. The spread is used as a "fear gauge" by investors ahead of the French elections.
"On the one hand the OAT( French government bonds) / Bund yield spread continues to knock around at levels that haven't been seen since 2012 and Mario Draghi's 'whatever it takes' moment. On the other, 73 basis points this morning is a lot tighter than the 150 basis points 2012 peak, let alone the levels near 200 basis points we saw in 2011," Kit Juckes, global fixed income strategist at Societe Generale, noted in an email.
"There's a sense of pre-election nervousness as we enter the final days of first-round voting, but it's not disorderly by any stretch of the imagination," he added.