French OATs recover from recent sell-offs as the spread to German Bunds narrows, while MUFG analysts warn that EUR/USD faces continued downside pressure.
MUFG maintains a bearish outlook for the EUR/USD pair, anticipating that downside risks will continue to dominate market sentiment. This projection is closely tied to the ongoing volatility and repricing observed in French OAT markets, which exerts downward pressure on the Euro.
MUFG expects downside risks to prevail for the currency pair.
The OAT/Bund spread widening to 150 bps is viewed by analysts as an overextended move, leading to a technical retracement from oversold levels as global fixed income selling pressure subsides. Furthermore, political concerns regarding Marine Le Pen's consolidation plans are deemed unlikely to significantly alter the risk profile of French bonds before the upcoming election.
No, analysts argue the move to 150 bps looked overdone, prompting a retracement.
It is considered unlikely to materially change the risk profile of French bonds ahead of next year's election.
Bund spread referenced as benchmark for OAT repricing.
French government bonds are retracing from oversold levels as the OAT/Bund spread stabilizes after hitting 150 basis points. MUFG analysts suggest the recent market volatility was overdone, though they maintain a bearish outlook for the Euro against the US Dollar.
French bonds are recovering as the sharp widening of the OAT/Bund spread to 150 basis points is viewed by analysts as an overreaction to global fixed income selling.
MUFG expects downside risks to prevail for the EUR/USD pair in the short term, despite the stabilization in French bond markets.