Le Pen signals budget compromise, French government bonds get a breather.

Given that a compromise on next year's budget bill is expected, the widening French government bond spread seen in recent weeks may ease. Far-right candidate Marine Le Pen said over the weekend that she prefers a full budget bill to be passed rather than resorting to a special bill procedure, because if she wins the next presidential election, a full budget bill would be easier to amend later. She also insisted that the budget bill must set out spending-cut plans. French Finance Minister Roland Lescure separately revealed that the government aims to implement about EUR 30 billion in spending reductions. As the risk of next year's presidential election rises markedly, investors have ample reason to remain cautious on French government bonds. If the budget bill can pass relatively smoothly, it will to some extent prevent the government bond spread and credit default swap spread from widening further.