SOCGEN interest-rate strategists say renewed geopolitical tensions have left
euro-area government bond yield spreads under widening pressure and the usual
seasonal narrowing has not materialized. "The usual seasonal narrowing has not
worked because, with expected new issuance after summer and rising politics
uncertainty, investors appear reluctant to hold spread-long positions," they
said. They expect the 10-year France-Germany spread may trade range-bound over
the summer but warn that weak fundamentals, heavy bond supply and uncertain
investor demand warrant caution in the medium term. Italy-Germany spreads remain
linked to oil prices; strategists still prefer short-dated sovereign exposure.
