We noted last month that credit markets are still sensitive to political polls, despite doubts about their accuracy.

In particular, sovereign cds in Western Europe was responding to polls showing National Front leader Marine Le Pen surging ahead in the race to become France’s next president. Le Pen has stated that she is in favour of leaving the EU under the current framework, so it was no surprise to see France’s spreads widen when she took the lead in the polls.

But it was the behavior in the “ISDA basis” - the difference between sovereign CDS trading under 2014 and 2003 definitions - that caught our attention. Before Le Pen’s surge in popularity, the basis was stable at around 3bps. After her gains in the polls, the basis increased to 23bps in the final week of January...