It’s all fun and games until everyone tries to sell their government bonds at the same time.

Markets have only begun seriously thinking about what the impacts of a more nationalistic, populist, reflationary economic climate might look like should the same political forces which caused the UK to vote itself out of the European Union and Donald Trump to become the 45th US President materialize into concrete legislative action. One notable impact is a significantly higher cost of financing debt for governments, corporations, and consumers. Marine Le Pen, leader of the National Front party in France and major contender in the upcoming French presidential elections, has a plan to Make France Great Again too. It is a much more pronounced version of Trump-onomics in its aim to protect domestic industry, restrict immigration, and tighten the reigns of its own sovereign control. Le Pen wants France to leave the shared euro currency bloc and introduce a “new French franc” within 6 months of her taking over the highest political office in France. She plans to finance her plans by taking control of the central bank and printing money to fund at least 5% of the government. This is also known as “helicopter money.”

Who in the right mind would want to lend France money with plans like that? Not enough people to keep a bid under the French bond market it seems. Make no mistake – Le Pen is still a long shot for President. She is expected to win the first round of the election taking place on the 23rd of April but handily lose a runoff election to Emmanuel Macron likely to take place on the 7th of May–so say the professional pollsters who have gotten nearly everything wrong in the past two years. Therein lies the problem. Markets are starting to worry. Take a look below at what has happened recently to the France-Germany 10y government bond spread. The higher the spread, the more investors are fleeing French bonds and jumping head first into the relative safety of German bunds. One has to wonder, however, about the wisdom of owning either at this juncture. My base case assumption does not anticipate a Le Pen Presidential victory in France but we will see higher bond yields globally regardless in the next 12-18 months, driven by a new paradigm of populist politics.