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Japanese investors, traditionally among France’s most loyal lenders, are not yet convinced that French political risks have faded and are staying away from the country’s bonds.

Some even exploited a rally in French government bonds last week to sell down their positions further, one London-based trader said.

Investors piled into French government bonds after centrist Emmanuel Macron took the lead over far-right leader Marine Le Pen in the first round of presidential elections on April 23.

But this did not seem to be enough to lure in Japanese investors, who held 12 percent of French debt at the end of last year.

“It is a bit difficult to buy French bonds now. There will be some twists and turns and we have to watch certain political events,” said Naoki Akiyama, general manager for investment planning at Nippon Life, Japan’s biggest private life insurer.

The London trader, who works closely with Japanese clients, said they had not bought bonds since the first round of voting.

“There’s been no demand (from Japanese investors), there’s actually been selling as they took profit on the knee-jerk rally on Monday (April 24),” he said, preferring to remain anonymous as he is not authorized to speak about his clients.

“Japanese investors were part of the crowd that were switching from OATs into Bunds — a mix of European, Asian and Japanese investors,” he said, referring to French and German government bonds.

At the end of 2016, Japanese investors held ¥27 trillion ($243 billion at current exchange rates) of French government bonds, or about 12 percent of the market, analysts said.

In February this year, though, they dumped a record ¥1.58 trillion worth of French bonds on concerns that Le Pen would win the presidential election.

Even though polls suggest Macron will become president in a May 7 runoff, they are yet to come back.

Japanese investors, including the big life insurers, have bought billions of euros worth of foreign bonds in recent years to counteract low yields in the domestic market.

French debt yields more than German benchmarks but is still among the eurozone’s highest-rated paper.

French 10-year yields hit a 2017 high of 1.16 percent in February, and the yield gap with Germany — seen as a measure of political risk in France — peaked at 82.6 basis points.

This dipped to as low as 40 basis points after the result — a cue for some Japanese investors to cut their French holdings further.

Hiroko Iwaki, senior foreign bond strategist at Mizuho Securities, said Japanese investors may be waiting for the next chance to enter the market, such as if yields rise in anticipation of tighter monetary policy.

“They have cash to put to work but they seem reluctant to make moves now. They should be ready to buy if certain hurdles are cleared,” he said.

The French-German spread move has since widened, standing at 46 basis points on Friday, possibly a sign of profit-taking.

Akira Takei, a fund manager at Asset Management One, added: “Considering we still have the second round vote and (June’s) parliamentary elections, I don’t see any reason to buy the euro further.”

The reluctance on the part of these investors comes at a time when market participants are worried that Asian investors are withdrawing from the eurozone government bond market on political concerns.

International Monetary Fund data shows the share of the euro in worldwide foreign currency reserves has been steadily declining since March 2010.

Three primary dealers who work with many eurozone public sector borrowers, including France, agreed that there were no signs of Japanese investors returning to the French government bond market last week.

Tuesday’s 8 billion eurobond sale by eurozone bailout fund European Financial Stability Facility — a key proxy for French debt — failed to attract Japanese demand, according to one of the bankers who ran that deal.

“You may get a better idea of Japanese demand if France does that 30-year after the second round of presidential elections,” the banker said.

France has been monitoring the market for a potential 30-year bond sale via syndication, a method by which borrowers appoint banks to sell bonds directly to investors.

The primary dealers believe the deal could come after the second round if Macron wins through.

A second trader who works with Japanese clients said he believes Japanese investors will return to the French government bond market eventually.

“Japanese investors generally have a lot of confidence in France, not just French debt. Normal service will be resumed, and they will be reinvesting in French debt and building their holdings back up over time,” he said.

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