French-German 10-yr yield spread rises to the highest level since July 2012

Political uncertainty seems to have made a comeback in the European bond markets, with German 2-yr yields dropping to a record low of -0.85%, while the 10-yr and 5-yr yields on the French government bonds pushing up by 5bps and 8bps respectively. 

Bond markets seems to have started pricing-in the increased possibilities for anti-Euro candidates to win elections in France and Italy, with the latest poll for the upcoming French Presidential elections revealing continuous gains for Marine Le Pen and resulting the French-German 10-yr government bond yield spread blows out to 85 bps, the widest level since July 2012.