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The Easiest Trade – MarketWatch

February 02
16:01 2017

LONDON (MarketWatch) — One of them faces allegations he paid his wife vast sums of money from public funds. Another wants to introduce a universal basic income — at a cost of 440 billion euros — paid for by taxing robots.

A third wants to take the country out of the euro EURUSD, +0.3436%  . And the final contender is a completely untested novice, who promised a lot as finance minister but delivered very little.

The French presidential election is rapidly becoming one of the most unpredictable contests of recent years — even bearing in mind the U.K.’s decision to leave the European Union, and the election of Donald Trump as president of the United States. The markets have already started to sniff trouble, doubling the spread between French and German bonds in the space of just a few weeks.

As the election gets closer and closer — and it becomes clear that none of the candidates have a credible program for reviving the French economy — that spread is only going to get wider still. Betting against the French government bond market, the fourth biggest in the world after the U.S., Japan and Italy, is now the easiest trade in the world.

Heading into the new year, the French presidential election in April and May looked relatively easy for the market to call. This column predicted that the outsider Emmanuel Macron would be the ultimate winner, but not many people saw it that way.

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