French 10-Year Yield Remains High as Inflation Fears Drive ECB Hike Bets

France’s 10-year OAT yield hovered around 3.8%, close to its highest since June 2009, and was poised to end March up roughly 60 basis points. Investors stayed cautious amid the economic fallout from the prolonged Middle East conflict, with reports of US troop deployments for a potential ground operation overshadowing diplomatic progress claims. Adding to the pressure, flash CPI data from Germany and Spain pointed to rising inflation, while the Eurozone business survey showed a steep decline in sentiment as inflation expectations climbed. Markets have sharply revised ECB policy outlook, now pricing in at least two rate hikes in 2026, and possibly a third, discarding earlier expectations of a 40% chance of a cut. French central bank chief François Villeroy de Galhau underscored the ECB’s determination to curb energy-driven inflation, but cautioned that discussing specific rate timing remains “premature.”

France’s 10-year OAT yield approached 3.9%, reaching levels not seen since June 2009 and on track to end March up over 60 basis points, as the Iran crisis sends energy prices spiraling and forces a dramatic repricing of ECB policy expectations from anticipated cuts to at least two rate hikes this year, with a third possible. The standoff intensified after President Trump extended his deadline for Iran to reopen the Strait of Hormuz, while clashing reports from Washington and Tehran cast doubt on diplomatic progress. Though German Foreign Minister Johann Wadephul confirmed indirect talks and upcoming direct negotiations in Pakistan, markets dismiss the prospect of a quick deal, seeing the extension as a move to strengthen military positioning. Compounding concerns, Spain’s inflation spiked to 3.3%, its sharpest rise since June 2024, amid soaring fuel costs, signaling broader inflationary risks across Europe.

France 10 Year Government Bond Yield increased to 3.87%, the highest since June 2009. Over the past 4 weeks, France 10Y Bond Yield gained 57.37 basis points, and in the last 12 months, it increased 43.55 basis points.