Election Scenarios
Macro Risk Parameters
112.4%
85.5 bps
100.0 bps
€5,000,000
Projected Spread
92.4 bps
+6.9 bps vs spot
Implied Volatility
14.8%
30-Day Forward 10Y Swaption
Portfolio at Risk (VaR 95%)
€184,800
Duration-adjusted exposure
Recommended Hedge
35.0%
Active Defensive Posture
OAT vs Bund 10-Year Trajectory & Projected Spread
French 10Y OAT
German 10Y Bund
Spread (bps)
Institutional Desk Trade Matrix
Scenario: Hung Parliament
| Instrument | Action | Target Size | Rationale |
|---|---|---|---|
| 10Y OAT / Bund Box Spread | Pay Fixed French / Rec Bund | €1,750,000 | Hedge widening beyond ECB 100 bps threshold |
| OAT 2Y vs 10Y Steepener | Curve Steepener | €1,000,000 | Protect against front-end fiscal supply indigestion |
| 30D OAT Payer Swaptions | Long 14.8% Vol Put | €500,000 | Convex asymmetric election weekend insurance |
Context & Analytical Grounding
Inspired by Bloomberg reporting (@business): "Wall Street is turning next year’s French election into a trade for investors, whichever way they expect the vote to go – Goldman and Deutsche Bank Turn French Election Into Bond Trade."
- Source Post: https://x.com/business/status/2097291374160715846
- Desk Models Referenced: Goldman Sachs International Sovereign Credit Strategy & Deutsche Bank European Rates Research.