Global Rates Strategy: Stable French spreads after court decision

Research evidence excerpt

Global Rates Strategy: Stable French spreads after court decision

Global Research

7 July 2026ab

Global Rates Strategy Interest Rates

GlobalStable French spreads after court decision

Reinout De Bock

Strategist

Expect stable range after court decision reinout.de-bock@ubs.com

+44-20-7567 0152

We expect 10y France over Germany to settle in a [65-75] bps range in the next two

months (from 79 bps currently) as a French appeals court will decide whether to uphold Julien Conzano

StrategistMarine Le Pen's ban on running for office. We have been long 10y bunds since end

julien.conzano@ubs.com

March '26, with a target of 2.75%. Away from Germany, we have been expecting +44-20-7567 2067

spreads to trade at relatively tight ranges for three straightforward - albeit maybe not

entirely comfortable - reasons. First, immediate fiscal risks seem constrained. We do not Mustafa Oguz Caylan

see a repeat of the fiscal support granted in the pandemic. France has also been

mustafa.caylan@ubs.com

stabilizing net supply to the market (Figure 1TheFrenchdeficitremainselevatedaround~5%GDPbutFrancehasmanagedtostabilizeOATnetsuply(adjustedforECBQE/QT)). Second, risk sentiment is doing the heavy +44-20-7901 5203

lifting now. When European equities perform, spreads go along. Third, the political

calendar with 2027 budget and 2028 elections could lead to some volatility and spread Phoebe White

widening but is relatively distant.

phoebe.white@ubs.com

+1-212-713 2130

Cleanest hedge for French risk and credit remains in OATs

France continues to benefit from a large institutional investor base with a relatively low

share of OAT holdings at banks and an average maturity at over ~8 years (see our note

from June '24 below). But 10y French spreads widened ~13 bps in the past month ahead

of the court decision.