French OAT Yields Ease Slightly but Hover Near 14-Year High

France’s 10-year OAT yield dipped below 3.6%, though it remained close to Friday’s 14-year peak of 3.67% as investors adopted a cautious stance ahead of slew of central bank decisions. Persistently rising oil prices, fueled by the escalating US-Israeli conflict with Iran, continue to amplify inflation concerns. Markets are now pricing in a tighter monetary stance from the European Central Bank by year-end, with money markets fully anticipating a rate hike by July and assigning an 85% probability to a second increase by December. This week, the ECB, Federal Reserve, and Bank of England are all expected to hold interest rates steady, with investors closely monitoring for signals on how policymakers plan to mitigate the economic repercussions of the ongoing conflict.

France’s 10-year OAT yield hovered around 3.6%, close to its highest level since November 2011, as escalating Middle East tensions fueled inflation fears and strengthened expectations of further European Central Bank tightening ahead of a week crowded with global central bank meetings. Oil prices remained above $100 per barrel, rising more than 40% this month, after Iran halted shipments through the Strait of Hormuz in response to US-Israeli air strikes. Israeli officials warned the conflict could persist for “several more long weeks,” while US President Donald Trump said Tehran is “not ready” to reach a deal. Major central banks, including the European Central Bank and the Federal Reserve, are expected to keep interest rates unchanged this week, while traders are watching closely for guidance on how policymakers may respond to the conflict’s economic impact. Money markets fully price in an ECB rate hike by July, with roughly an 85% chance of a second increase by year-end.

France’s 10-year OAT yield climbed above 3.65%, reaching its highest level since November 2011, as escalating Middle East tensions heightened inflation concerns and fueled expectations of further European Central Bank rate hikes. Oil prices continued their upward trajectory despite recent measures aimed at easing the energy supply shock, with investors doubtful that these efforts will fully offset potential disruptions in the Strait of Hormuz. The spike in energy costs has led money markets to price in two ECB rate hikes this year, a significant shift from last month when no moves were expected. Attention now turns to the ECB’s upcoming policy meeting, where President Christine Lagarde is expected to outline how the bank plans to protect the eurozone from inflationary pressures stemming from the conflict. Earlier this week, she reiterated that the ECB would act to prevent a repeat of the inflation shocks seen after Russia’s invasion of Ukraine.