French OAT Yields Fall to Lowest Since September

France’s 10-year OAT yield fell to 4.7%, its lowest level since late September, as declining oil prices eased inflationary concerns and prompted traders to scale back expectations for further central bank rate hikes. Brent crude slipped below $95 a barrel after US President Donald Trump downplayed the likelihood of further strikes on Iran, although attacks on vessels near the Strait of Hormuz continued to fuel supply concerns. The move follows a bond rally last week after the Democrats’ sweeping victory in the US midterm elections raised expectations of political gridlock and more limited fiscal spending. Markets currently price in a 66% probability of an ECB rate hike in December, with an increase by February fully priced in, according to LSEG data. However, French bonds remain vulnerable to domestic political and fiscal uncertainties, as well as questions surrounding the ECB leadership transition following Christine Lagarde’s announcement that she intends to step down early.

France's 10-year OAT yield rose towards 4.8% as investors reassessed expectations of December interest rate hikes by the Federal Reserve and the ECB, while ongoing political and fiscal uncertainties continued to weigh on French debt. These pressures outweighed the relief from falling oil prices after US President Donald Trump played down the prospect of further strikes on Iran. Bond markets initially rallied last week after the Democrats' sweep in the US midterm elections raised expectations of political gridlock and more limited fiscal spending. However, yields reversed course on Friday as stronger-than-expected US employment data pushed the implied probability of a December Fed rate hike to 81%. Expectations of an ECB rate increase are more modest at 66%, reflecting the Eurozone's weaker growth outlook. European bond markets also face uncertainty surrounding the ECB leadership transition, following President Christine Lagarde's announcement that she intends to step down early.

France’s 10-year OAT yield fell below 4.8%, as investors shifted away from technology stocks following the Democratic sweep in the US midterm elections and sought safer assets such as government bonds. Global bond yields also moved lower, tracking declining US Treasury yields, as the Democratic takeover of the House was seen as reducing the likelihood of further deficit-expanding legislation under the Trump administration and easing concerns over US government borrowing. However, persistent concerns over France’s domestic fiscal outlook continued to weigh on French government bonds, limiting the decline in yields. Meanwhile, accelerating eurozone inflation and increasingly hawkish rhetoric from ECB policymakers reinforced expectations of tighter monetary policy. Despite leaving interest rates unchanged last week, ECB officials signaled that further hikes may be necessary to contain inflation and prevent price pressures from feeding into wages.