'Blowout' in French borrowing costs still to come amid economic deadlock, veteran investor says

French borrowing costs still face a "blowout" over those of Germany, as political and economic reality sets in following the country's parliamentary election, according to veteran investor David Roche.

However, former European Central Bank chief Jean-Claude Trichet told CNBC he believes that, despite current uncertainty, a "coalition of ideas" will form to break any deadlock.

The French bond market has remained relatively calm in the wake of the Sunday run-off vote, which handed a surprise victory to the left-wing New Popular Front alliance. No single party or coalition won an absolute majority, leaving France to contend with a hung parliament.

The spread between French and German 10-year bond yields was around 70 basis points on Wednesday, down from the 12-year high of 85 basis points it hit on June 28 — and up from 49 basis points before President Emmanuel Macron shocked the nation by calling the snap election. French debt historically carries a premium over that of Germany, but the gap has reached levels not seen since the European debt crisis in the early 2010s.

Bond yields move inversely to prices and represent the change in borrowing costs for a government — also indicating long-term investor confidence in the economy.

Quantum Strategy President David Roche said market watchers may have expected a "blowout" to a 120-basis-point spread between French and German sovereign debt, given that the new French government is highly unlikely to cut the country's fiscal deficit to comply with European Union regulations.

"But actually, nothing has happened. Now, my view is that it will happen," Roche told CNBC's "Squawk Box Europe" on Tuesday.

"It will happen when it comes home that actually political paralysis in France is economic