French risk premium hits post — 2012 high as debt markets weaken
(Updates throughout) Money markets price ECB benchmark rate near 3% by year-end German 2-year yields hit 3.263%, on track for sixth weekly gain French 10-year premium over Germany hits 1 percentage point By Amanda Cooper LONDON, Sept 18 (Reuters) — Euro zone bond prices fell and the premium investors demand to lend to France hit its highest since 2012 on Friday at the end of a volatile week in which yields have hit multi-year peaks. Global central banks have escalated their fight against inflation, with the US Federal Reserve and Bank of Japan following the European Central Bank in raising interest rates, while the Bank of England left them unchanged, but signalled it too could raise borrowing costs if energy-driven inflation stemming from conflict in the Middle East worsens. More vulnerable debt markets have come under most pressure, with French 10-year yields up 13 basis points at 4.573%, taking the premium investors require to lend to France, rather than Germany, to a full percentage point for the first time since July 2012. French 10-year OAT yields have risen 12.5 bps this week, the most out of any G7 country, while two-year yields have risen 15 bps to 3.536%. "With few cataly
263%, on track for sixth weekly gain French 10-year premium over Germany hits 1 percentage point By Amanda Cooper LONDON, Sept 18 (Reuters) — Euro zone bond prices fell and the premium investors demand to lend to France hit its highest since 2012 on Friday at the end of a volatile week in which yields have hit multi-year peaks. Global central banks have escalated their fight against inflation, with the US Federal Reserve and Bank of Japan following the European Central Bank in raising interest rates, while the Bank of England left them unchanged, but signalled it too could raise borrowing costs if energy-driven inflation stemming from conflict in the Middle East worsens.
573%, taking the premium investors require to lend to France, rather than Germany, to a full percentage point for the first time since July 2012. 536%. "With few catalysts for a material improvement in the fiscal outlook, we continue to expect OAT spreads to widen and would need to see materially wider spread levels before becoming constructive," Jefferies economist Modupe Adegbembo said. French Prime Minister Sebastien Lecornu is racing to finalise a deficit-taming 2027 budget as bond market pressure mounts and voters grow restless over the rising cost of living.
5 bps, meaning it costs more to take out protection for France than for any other developed economy. Beyond France, yields rose across the euro zone. 52%, reversing the previous day's decline. 5723% on Tuesday, the highest since June 2009.
3 bps so far this week. Central banks are likely to reinforce their tightening bias after the Fed adopted a more restrictive stance on Wednesday. However, investors continue to bet on a more aggressive rate path than that outlined by US policymakers in the dot plot. Energy prices remained in focus, with Brent crude futures falling for a third day as some concern eased over supply disruptions from the Gulf, but prices were still above $100 a barrel.
"For now, risks remain skewed towards higher inflation, with central banks focused on rates and the easing in financial conditions. The bigger uncertainty is whether markets have already priced terminal rates that prove difficult to deliver," Mizuho strategists Evelyne Gomez-Liechti and Masayuki Nakajima said in a note. 27% by March, implying another three rate hikes in the coming six months. 3123% on Monday, the highest since September 2023.
They were on track for a near-9-bp rise this week, set for their sixth straight weekly rise. com)