Industry Updates

Investors get tactical with French and German sovereign ETFs

IFRB sees substantial inflows in June

Theo Andrew

France flag Paris

Investors have sought to get tactical with French and German sovereign bond ETFs ahead of the elections in France.

The $1.5bn iShares France Govt Bond UCITS ETF (IFRB) recorded $880m inflows over the past month, according to data from ETFbook, ahead of the first round of voting in the country’s parliamentary election on 1 July.

It came as fund selectors pulled money from German bunds, with the Xtrackers II Germany Government Bond UCITS ETF (XBTR) posting outflows of $304m over the same period.

Investors were looking to take advantage of the dispersion in yields between France government bonds and German bunds.

The yield spread between French and German sovereign bonds was at a 12-year high ahead of the first round of voting.

The spread is seen as the premium investors demand for the extra risk of holding French bonds.

However, the spread tightened following Monday’s voting when it became clear it would be unlikely Marine Le Pen’s National Rally would gain an overall majority.

Markets have been concerned that a Le Pen government in full control would damage the country’s fiscal position with large spending.

French political parties are expected to embark on days of political alliance building in a bid to block a National Rally majority ahead of next week’s second vote.

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