France’s 10-year OAT yield traded around 4.8%, hovering near one-week lows and down nearly 5 bps on the week. The move mirrored a global easing in borrowing costs, as expectations for further monetary policy tightening moderated following comments by Fed Chair Warsh at the IMF summit. In Europe, remarks from ECB President Lagarde further supported a cautious, wait-and-see stance.
Despite the weekly decline, French borrowing costs remain close to their highest levels in more than two decades, with record public debt and political constraints complicating efforts to consolidate the public finances. The government is targeting a reduction of the budget deficit to 5% of GDP by 2027, but securing parliamentary backing for significant spending cuts remains uncertain ahead of next year’s presidential election.
Lagarde also sought to downplay speculation about a potential ECB intervention in response to France’s widening budget crisis, emphasizing that “the primary and first solution lies at home in France, and it has to do with fiscal policies”.