'Blowout' in French borrowing costs still to come amid economic deadlock, veteran investor says

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'Political paralysis in France is economic paralysis in France,' David Roche told CNBC.

French borrowing costs will spike over those of Germany "when it comes home that actually political paralysis in France is economic paralysis in France," Quantum Strategy President David Roche told CNBC on Tuesday.

Bond yields move inversely to prices and represent the change in borrowing costs for a government — also indicating long-term investor confidence in the economy.

In a Sunday note, Roche recommended shorting French government bonds versus German bonds. A short is a bet that an asset price will fall. Political deadlock will meanwhile give the far-right Rassemblement National party an opportunity to sit back and criticize, allowing its long-term figurehead Marine Le Pen to position herself for a presidential bid, Roche said.

Former Bank of France Governor Jean-Claude Trichet was more optimistic that the current crop of politicians will find a way to move forward together through coalition talks, implying no deadlock and no risk of a domestic or wider European debt crisis that would require European Central Bank intervention.

 

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