French bond yields rise as Fillon scandal threatens to deliver far-right Marine Le Pen the Presidency
Investors are fleeing French government debt on fears that far-right Marine Le Pen will become President, as the candidacy of former favourite Francois Fillon continues to be tainted by a scandal involving his Welsh-born wife.
The yield on the French 10-year government bond has risen steadily over the past month to reach highs of 1.128 per cent, a level not seen since 2015.
While much of the rise in bond yields in recent months was caused by a general rebalancing of investor portfolios after the election of Donald Trump as US President, the perception of an increased risk of Le Pen winning the Presidency for the far-right National Front is also weakening investor confidence in French debt.
The political dimension can be seen in comparison to fellow Eurozone economy, Germany. The spread between French and German bonds reached three-year highs on Wednesday, as investors judge German debt to be safer.
The chances of a Le Pen victory, which would lead to protectionism in France and probably to the collapse of the euro, have widened after accusations of corruptions from Fillon, the right-wing Republican candidate.
A French satirical paper, Le Canard Enchaine, claims Fillon employed his wife Penelope, who was brought up in Abergavenny in South Wales. The paper claims she was paid more than €800,000 (£682,000) for work as a parliamentary assistant which was never done.
The paper also claims Fillon paid his sons for work, while confusion has increased as Fillon’s responses to allegations have been allegedly contradicted.
French television channel France 2 has also uncovered footage of Penelope Fillon claiming she had never worked for her husband in an interview in 2007 with a British newspaper. The footage will be broadcast this evening.
Polls for French business paper Les Echos have shown the scandal has severely damaged the former favourite’s hopes, with Fillon being knocked out in the first round.
The poll shows centrist independent Emmanuel Macron would then contest the final round run-off with Le Pen, a contest Macron is expected to win.