French bonds under pressure, risk premium highest since euro zone debt crisis
Stocks also underperforming as political uncertainty premium remains
French bank shares remain below levels before Macron called snap election

LONDON, Sept 27 Reuters France finally has a new government, but it is unclear how long it will survive, so the political uncertainty hanging over French financial markets is unlikely to lift anytime soon.

The rightleaning cabinet, appointed 212 months after an inconclusive snap election, has a tough task ahead to get reforms or the 2025 budget approved by a very divided parliament.

It39;s the question mark How long will that government continue?, said Michael Krautzberger, chief investment officer for fixed income at Allianz Global Investors.

With investor unease rising again, we look at how French assets are faring and what39;s next

1 BONDS BRUISED

France39;s government bonds are under renewed pressure.

Their closely watched risk premium over German debt is trading around 80 basis points , the most since early August, creeping back to its highest levels since the euro zone debt crisis at more than 85 bps breached in the summer.

French bonds also pay a higher yield than Spain39;s for the first time since 2008, another sign that investors are no longer willing to look past the creaking public finances in France as fiscal and political questions hurt sentiment towards the euro zone39;s secondbiggest economy.

How French bonds fare will depend…