As the 2027 French presidential election draws closer, major global banks like Goldman Sachs and Deutsche Bank are offering financial products that let investors bet on different political outcomes in France, according to Bloomberg. These products are made up of baskets of French bonds, including those issued by banks. Investors can wager on whether the value of these baskets will go up or down without having to buy each individual bond. This development shows that financial markets are not only speculating about who will win the election but are also trying to assess how each possible outcome might affect their financial gains or losses. Investors can participate in these bets by buying or selling bonds directly or through financial tools called "total return swaps." These swaps allow investors to mimic the gains or losses of a bond basket without owning the bonds themselves. French banks are particularly involved in these instruments, which can also act as a form of insurance. For example, an investor who has already taken on significant risk in French companies or banks might bet on a drop in bond prices to offset potential losses if the economy becomes unstable after the election. Some of the baskets include "AT1" bonds, or "Additional Tier 1" bonds, which offer higher returns but are riskier. If a bank faces serious financial trouble, the investor could lose part or all of their investment, as the bank might stop paying interest or even cancel the bond. French AT1 bonds have performed worse than similar bonds in other European countries in recent weeks. Their risk premium, which measures the extra return investors demand for taking on more risk, has increased, while the European market’s risk premium has decreased. This is because French banks hold a large amount of national debt and are closely tied to the country’s economic performance. If public finances worsen, a recession hits, or interest rates rise sharply, it could negatively impact the government, businesses, households, and banks all at once. As the election approaches, investors are focused on what economic policies the next president will pursue, especially since current President Emmanuel Macron faces a public deficit of over 5% of the country’s GDP, rising interest costs, and an economy nearing recession. Economists from Berenberg recently warned that growth in France is slowing, fiscal policies are unsustainable, and political challenges are becoming increasingly concerning. Goldman Sachs has issued a bleak outlook for French finances, calling recent budget updates "disappointing." The bank predicts that the deficit will remain above 5% of GDP in both 2026 and 2027, showing no improvement. It also expects opposition parties to be less willing to compromise on the next budget due to the election’s proximity, which could keep French government bonds under pressure. With growth expected to be just 0.4% this year, debt levels are likely to continue rising, with a 15% chance of exceeding 130% of GDP by the end of the decade.