January 30, 2017 / 9:37 AM / a year ago

Gap between French and German borrowing costs widest in three years

LONDON, Jan 30 (Reuters) - The premium France pays to borrow over Germany in bond markets spiked to its highest in three years on Monday as conservative presidential election favourite Francois Fillon appeared to be losing support.

While polls still show either Fillon or centrist Emmanuel Macron winning the vote, investors fear a scandal over allegations of misuse of public funds engulfing Fillon could open a window of opportunity for the far-right, eurosceptic Marine Le Pen.

French 10-year bond yields spiked to a 16-month high of 1.12 percent on Monday, widening the gap with benchmark German equivalents to over 60 basis points for the first time in three years.

“A widening in French bond spreads is very much related to political events, with Fillon affected by a scandal,” said DZ Bank rates strategist Daniel Lenz. (Reporting by John Geddie, editing by Nigel Stephenson)

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