French Bond Yields Hit Highest Since 2008

France’s 10-year OAT yield climbed above 4.2%, its highest level since November 2008, as investors digested fresh inflation data that strengthened expectations for another ECB rate hike this month, with the Iran war continuing to put upward pressure on prices. Eurozone inflation accelerated to 3.3% in August, its highest since September 2023 and well above the ECB’s 2% target, driven by surging energy prices. Markets now price the ECB’s deposit rate at around 2.70% by December, implying an 80% probability of a second hike following an expected September move. ECB policymakers Olli Rehn and Martin Kocher warned that prolonged conflict and rising inflation risks could require further tightening. Meanwhile, hawkish comments from Fed Chair Kevin Warsh pushed markets to price in a 66% probability of a September Fed hike.

France’s 10-year OAT yield rose to 4.15%, its highest level since November 2008, as higher oil prices and hawkish central-bank signals fueled expectations for higher interest rates. Brent crude rose after the US said it had attacked an Iranian island in the Strait of Hormuz, while Tehran said it had retaliated by targeting US assets in the region. Markets are pricing the ECB’s deposit rate at around 2.7% by December, implying roughly an 80% probability of a second rate hike following an expected move as early as September. Meanwhile, Fed Chair Kevin Warsh warned that inflation has not slowed meaningfully and that the Fed still has “work to do,” pushing markets to price in a roughly 60% chance of a September rate hike. On the political front, France faces a difficult budget battle in the coming months, with investors watching closely for signs that Paris can restore control over its public finances.

France 10 Year Government Bond Yield increased to 4.15%, the highest since November 2008. Over the past 4 weeks, France 10Y Bond Yield gained 20.76 basis points, and in the last 12 months, it increased 61.18 basis points.