FX.co ★ French 10-Year OAT Yield Hits Fresh 18-Year High

France’s 10-year OAT yield climbed to a new 18-year high of 4.7%, as persistently high oil prices and stronger economic data bolstered expectations of further monetary tightening by the European Central Bank. The country remains under particular scrutiny ahead of the 2027 election, burdened by a sizeable primary deficit and elevated fiscal risks in the context of a fragmented parliament.

Brent crude advanced as escalating tensions in the Middle East dimmed hopes for a diplomatic resolution to the conflict between the United States and Iran. At the same time, data published on Wednesday showed that private-sector activity in the eurozone is expanding at its fastest pace in nearly three and a half years, while French output increased for the first time in 10 months.

Money markets are now fully pricing in at least one 25-basis-point rate hike by the ECB before year-end, and assign roughly a 40% probability to a second move. In the United States, investors have likewise raised their expectations for additional Federal Reserve rate hikes, following hawkish remarks from policymakers and stronger-than-anticipated PMI readings.