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Cost of insuring French government debt at 20 month high, as elections spook investors

FILE PHOTO: Bardella speaks after the polls closed during the European Parliament elections, in Paris

LONDON (Reuters) - The cost of insuring France's debt against default and the risk premium investors demand to hold French government debt both reached their highest since 2022 on Thursday amid jitters ahead of a snap parliamentary election.

France's 5-year credit default swap widened to 31 basis points (bps), from 28 bps at Wednesday's close, data from S&P Global Market Intelligence showed, its highest since October 2022.

The spread of French 10-year bond yields above their German equivalent rose to 71 bps late on Thursday, its highest intraday level since August 2022, according to LSEG data.

President Emmanuel Macron called a shock snap legislative election on Sunday following a bruising loss in the weekend's European Parliament vote to Marine Le Pen's far-right National Rally, which is leading the polls for the first round of voting on June 30.

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The possibility that the National Rally could win has compounded investor concerns around France's fiscal discipline, and ratings agency S&P Global, which recently downgraded the country, said policies advocated by the party could have implications for the credit rating.

French stocks fell 2% on Thursday in their biggest one-day drop in almost a year.

(Reporting by Alun John and Harry Robertson; Editing by Dhara Ranasinghe and Mark Potter)