Impact of France’s political crisis on credit

·       In the midst of a renewed and strengthened political crisis in France, what have we seen in the credit market recently ?·    1/ Financials have been more hit (once again) than corporates, confirming our call that sensitivity of the former to OAT-Bund is 2x as much as the one of the latter·  2/ French AT1s have widened by almost 18bp vs swap in 3 days, largely underperforming their index (20bp underperformance had been seen in June 2024)… mainly due to equity correlations·   3/ RT1s have hardly reacted so far, which put them at risk keeping in mind the June 2024 movement (although dissolution appears less likely in the short term)·    4/ 5-10Y French corporates more at risk of widening if the political crisis deepens, while 0-5Y is the area to avoid on French banks SP and SNP debt