The week is off to a good start on the bond front for our OATs, which have reduced their spread with the Bund by -3.5pts.
The Bund is up +2pts to 2.4275% and the OAT is down -1.5pts to 3.149%. This improvement comes as employers and business circles say they have been reassured by the RN's program (presented on Monday), which rules out promises that are too costly and calls into question the 64-year retirement age (limiting itself to "adjustments", notably by bringing forward the retirement age to 62 for a 42-year career).

Even if the program is still vague, especially in terms of revenue, there seems to be a desire not to provoke a 'Hollande effect' (a flight of capital).
The RN does, however, plan to abolish a tax advantage granted to shipowners (reduced taxes during peak periods)... a contested measure and a test of determination to apply it.

The program of the new Popular Front - not yet finalized - seems much more disruptive, with a cost ranging from $20bn to E100bn (depending on the wishes of the ultra-left), and the hypothesis of a good score on June 30 at 20:00 cannot be formally ruled out.
Investors should therefore be risk-averse ahead of the first round of legislative elections, the outcome of which will prove decisive for the country's future.

For the time being, foreign investors are taking a wait-and-see attitude, but they are beginning to envisage two worst-case scenarios: a grand coalition in which LFI would have significant economic clout, or the absence of an absolute majority for the RN, which could lead to the resignation of the President of the Republic", stresses Christopher Dembik, investment strategy advisor at Pictet AM.

All this is obviously very hypothetical", the market analyst moderates, however.

"Let's not forget that France is planning to borrow massively on the markets in July. We're going to have to reassure quickly", he warns.

An Ipsos poll currently gives the Rassemblement National and its allies around 35.5% of voting intentions, followed by the Nouveau Front Populaire in second place with 29.5% of the vote.

On the macro-economic front, the Ifo business climate index, calculated from a sample of some 9,000 companies, fell to 88.6 from 89.3 in May, its lowest level for three months.
The sharper-than-expected deterioration in German business confidence in June shows that Europe's leading economy is not yet out of the woods.

In the United States, no market mover on Monday, and some questions are becoming more pressing as the first debate between Joe Biden and Donald Trump, scheduled for this Thursday, prepares for the November presidential election in the USA.
Will Joe Biden be able to stand up to Donald Trump and overcome a debate that could be "without concession"?

The markets are also likely to remain plagued by uncertainties concerning the pace of inflation across the Atlantic.

In this context, market participants will be keeping a close eye on Friday's publication of the PCE inflation index, which is particularly closely watched by the Fed.
For the time being, American investors have decided to take no action: US T-Bonds remain unchanged at 4.265% (+1Pt symbolic).

Across the Channel, British Gilts have deteriorated solo by +3.3Pts to 4.114%, returning to their June 13 levels.

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