📝New French Government to Pass Budget Is Base Case: Barclays

Sentiment is downbeat on France, where OAT and domestic exposed stocks have been treading water since former PM Bayrou unexpectedly called a for a non-confidence vote last month. So expectations have been reset lower and our base case remains that the new government under PM Lecornu will manage to pass the budget with the help of the Left, resulting in lower fiscal consolidation than previously envisaged under Bayrou. This could help easing some pressure on spreads and the domestic assets. However, if things turn for the worse leading to call for new elections for the Assembly, then it could spook the bond market and trigger a sell off in domestic assets. So the wait & see continue. - Barclays