France’s OAT Yields Retreat, but Heads for Sharp Monthly Rise

France’s 10-year OAT yield fell below 4.9%, tracking a decline in US Treasury yields following the Democratic sweep in the US midterm elections. A Democratic takeover of the House is seen as reducing the likelihood of further deficit-expanding legislation under the Trump administration, easing concerns over US government borrowing. However, persistent concerns over France’s domestic fiscal outlook continued to weigh on French bonds. Meanwhile, accelerating eurozone inflation and increasingly hawkish rhetoric from European Central Bank policymakers reinforced expectations of tighter monetary policy. Eurozone annual inflation climbed to a fresh three-year high of 4.0% in October, driven largely by a surge in energy prices. Despite last week’s decision to leave interest rates unchanged, ECB officials signaled that further rate hikes may be necessary to contain inflationary pressures and prevent them from spilling over into wages.

France’s 10-year OAT yield climbed back to 4.95%, as investors remained cautious ahead of Tuesday’s US midterm elections. Sentiment also remained under pressure from concerns over France’s fiscal outlook after Fitch Ratings unexpectedly revised the country’s outlook to negative, citing deteriorating public finances, elevated government debt and borrowing costs, weaker economic growth and persistent political uncertainty. Meanwhile, hawkish comments from European Central Bank officials on Friday, just hours after the central bank left interest rates unchanged, suggested that monetary tightening may have been delayed rather than ruled out, keeping the prospect of a December rate hike on the table. Across the Atlantic, US voters head to the polls, with the outcome of the House and Senate races closely watched by investors for potential implications for financial markets and broader risk sentiment.

France’s 10-year OAT yield fell to 4.9%, tracking renewed declines in oil prices despite persistent concerns over the country’s fiscal outlook. Oil prices retreated after reports suggested US President Donald Trump was willing to give diplomacy with Iran more time before considering renewed military strikes following Tuesday’s midterm elections. Meanwhile, Fitch Ratings revised France’s outlook to negative, citing deteriorating public finances, high government debt, elevated borrowing costs, weaker growth and political uncertainty. The agency expects public debt to rise from 115.7% of GDP in 2025 to 124% by 2028, while the budget deficit is projected to remain at 5.5% next year, above the government’s 5% target. Elsewhere, the ECB kept interest rates unchanged on Thursday. President Christine Lagarde confirmed that a rate hike had been discussed, but policymakers unanimously opted to hold borrowing costs steady, citing tighter financial conditions as a factor helping contain inflation.