French Bond Yields Ease as ECB Rate Hike Bets Retreat
France’s 10-year OAT yield eased to 4.85%, retreating slightly from a more than two-decade high, as markets scaled back expectations for European Central Bank tightening following a stall in the oil rally after US President Donald Trump said Washington would not attack Iran before the November midterm elections. Money markets now price the ECB deposit rate rising from 2.50% currently to 2.72% by December and 3.20% by late 2027. Before the recent widening in bond spreads, investors had anticipated roughly one additional rate hike in early 2027. French bonds remain under pressure from expectations of higher ECB rates and political uncertainty ahead of the 2027 presidential election, which have heightened concerns over France’s ability to rein in its public finances. The spread between French OATs and German Bunds narrowed slightly this week to around 135 basis points, down from 159 bps last Friday, its widest level since November 2011.
85%, retreating slightly from a more than two-decade high, as markets scaled back expectations for European Central Bank tightening following a stall in the oil rally after US President Donald Trump said Washington would not attack Iran before the November midterm elections. 20% by late 2027. Before the recent widening in bond spreads, investors had anticipated roughly one additional rate hike in early 2027. French bonds remain under pressure from expectations of higher ECB rates and political uncertainty ahead of the 2027 presidential election, which have heightened concerns over France’s ability to rein in its public finances.
The spread between French OATs and German Bunds narrowed slightly this week to around 135 basis points, down from 159 bps last Friday, its widest level since November 2011.