French Bond Yields Little Changed

France’s 10-year OAT yield traded near 3.45% as investors assessed the European Central Bank’s policy outlook and awaited key economic data, notably the upcoming US jobs and CPI reports. The ECB kept interest rates unchanged at last week’s meeting and reaffirmed that inflation is projected to return sustainably to its 2% medium-term target. President Christine Lagarde adopted a balanced tone, describing the euro area’s inflation outlook as being in a “good place” and playing down concerns over the euro’s recent appreciation. She also cautioned that economic data could be volatile in the coming months and should not be interpreted in isolation when guiding policy decisions. Investors additionally absorbed news that Bank of France Governor François Villeroy de Galhau will step down on June 1, 2026, before the scheduled conclusion of his mandate in autumn 2027.

France’s 10-year OAT yield was slightly below 3.45% after the European Central Bank kept interest rates unchanged, reiterating that inflation is expected to converge toward its 2% target over the medium term. The ECB said the euro area economy remains resilient, but cautioned that the outlook is clouded by global trade policy uncertainty and ongoing geopolitical tensions. At the ECB press conference, President Lagarde reiterated that both the central bank and the euro area inflation outlook are in a “good place,” while cautioning that inflation readings may fluctuate in the months ahead amid higher uncertainty. Meanwhile, domestic factors also remained in focus after France’s 2026 state budget was approved earlier this week, ending months of political deadlock that had heightened concerns over fiscal risks. The deficit target was revised higher to close to 5% of GDP, up from an initial goal of 4.7%, reflecting concessions made to secure parliamentary approval.

France’s 10-year OAT yield eased to 3.44%, near its lowest level since late November, as markets digested weaker eurozone inflation data. January’s CPI slowed to 1.7%, well below the ECB’s target, while core inflation unexpectedly fell to 2.2%, its lowest since October 2021, raising the prospect that a stronger euro could prompt a resumption of rate cuts paused in June. The ECB is set to announce policy on Thursday and is widely expected to keep rates unchanged for a fifth consecutive meeting, with ECB President Christine Lagarde expected to reiterate that policy remains in a “good place.” Meanwhile, France’s 2026 state budget was approved by parliament on Monday, ending a months-long stalemate that had fueled concerns over rising fiscal risks in the eurozone’s second-largest economy. Prime Minister Sébastien Lecornu had initially targeted a 4.7% of GDP deficit, but political concessions pushed the figure closer to 5%.