It may not look very dramatic, but looks can be deceiving.
It’s all about France today, following reports that Socialist Party presidential candidate Benoit Hamon said he’s holding further talks with far-left candidate Jean-Luc Melenchon about a potential single candidacy.
That would change the dynamics around the May 7 runoff in favor of crazy ass Marine Le Pen and thereby raise the odds of the very same catastrophic redenomination event that I’ve been warning about for weeks.
Needless to say, the spread between French govies and German bunds is blowing out by the most in a week:
(Bloomberg)
Remember, the OAT-bund spread has become the market’s risk barometer par excellence this year. Translation: do not look at that chart and think to yourself “bummer, I wanted to see something dramatic.”
You’re seeing something dramatic. And indeed, if you frequent these pages, you remember Wednesday’s “Holy Sh*t Chart Of The Day” which was (surprise) the correlation between €IG credit and the OAT-bund spread.
Holy SH*T!