State Street Investment Management strategist Masahiko Loo said recent selling
in French government bonds reflects both arbitrage unwind and a market
reassessment of France’s fiscal risk. Hedge funds and active real-money
investors closing arbitrage positions amplified moves after recent politics
headlines. Loo said investors are increasingly questioning France’s fiscal
trajectory: the country has not recorded a budget surplus since 1974, and
although officials say they intend to address fiscal challenges, the timing and
details of measures are likely to face implementation hurdles. He expects
elevated bond-market volatility could persist through the April–May 2027
presidential election cycle.
