French Bonds Stumble as Street Protests Fuel Political Anxiety

The 10-year French OAT yield surged 7.8 basis points to 4.866%, widening the spread against German Bunds to a two-week high of 145 basis points. Analysts at KBC Bank noted that what began as localized student dissatisfaction has transformed into a broad rejection of the administration, fueled by the rising cost of living and stagnant public services. With national debt exceeding 119% of GDP, the government faces a precarious path to secure next year’s budget in parliament amid mounting international pressure.

Contrasting the European volatility, U.S. Treasury yields fell, with the 10-year note dropping 2.1 basis points to 5.076%. This decline follows a cooling in oil prices and growing sentiment that the Federal Reserve may hold rates steady during its upcoming October decision. Despite recent inflationary pressures, market focus is shifting toward the long-term economic impact of high borrowing costs. Barclays maintains a more hawkish outlook, however, projecting additional hikes in December and January to combat persistent price increases, even as money markets assign an 85% probability to a pause this month.