French 10-year bond yield rises by 16 basis points — CNBC
In France, the yield on benchmark 10-year OAT government bonds rose by 16 basis points on Wednesday after declining the previous day. Since the beginning of the year, the indicator has increased by more than 100 basis points amid investor concerns over the budget deficit, political instability and the government’s ability to implement large-scale spending cuts, CNBC reports.
Budget negotiations
Next week, the French government is due to begin difficult budget negotiations. It must persuade the politically divided National Assembly to support fiscal adjustment worth tens of billions of euros. The parliament includes, among others, the far-right National Rally party, the left-wing New Popular Front and the centre-right group of Prime Minister Sébastien Lecornu.
Following the snap election in July 2024, no political force won a parliamentary majority. Budget disputes have already led to the resignation of two governments following votes of no confidence. Lecornu was only able to pass the 2026 budget in February by using emergency legislation that allowed him to bypass parliament.
According to CNBC, France’s budget deficit exceeded 5.1% of GDP last year. Far-right candidate Marine Le Pen said on Tuesday that, if she wins the presidential election, she would seek to reduce the deficit to 3% within 18 months, but critics questioned the feasibility of these plans.
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Protests and market reaction
Pressure on the authorities is being intensified by student protests that have continued for a third week. The actions were temporarily suspended on Wednesday, but are expected to resume on Thursday. The movement, which began in Paris with demands to address teacher shortages, long timetables and neglected schools, has spread across the country. The protests were accompanied by clashes with police, school closures and thousands of detentions.
Lecornu said the authorities would use the pause in demonstrations for dialogue with high school students. At the same time, his government accused the radical left-wing party La France Insoumise of trying to take over the student movement. Party representatives publicly supported the protests.
Bank of France Governor Emmanuel Moulin said the European Central Bank was not intended to solve the fiscal problems of individual states and currently had no grounds to intervene. Pimco CEO Emmanuel Roman called the situation in the French bond market critical and stressed the need to adopt a budget and implement reforms. Principal Asset Management manager Anthony Brinkman suggested that pressure on French debt securities could intensify, including because of upcoming assessments by Moody’s and S&P.
