FX.co ★ French Bond Yields Fall Despite Fiscal Concerns

France’s 10-year OAT yield declined to 4.9%, mirroring renewed weakness in oil prices despite ongoing concerns over the country’s fiscal trajectory. Crude prices fell after reports indicated that US President Donald Trump was prepared to allow more time for diplomatic efforts with Iran before considering fresh military strikes following Tuesday’s midterm elections.

At the same time, Fitch Ratings revised France’s sovereign outlook to negative, pointing to deteriorating public finances, a high government debt burden, elevated borrowing costs, subdued growth, and heightened political uncertainty. The agency projects public debt to increase from 115.7% of GDP in 2025 to 124% by 2028. The budget deficit is forecast to remain at 5.5% of GDP next year, overshooting the government’s 5% target.

Elsewhere in Europe, the ECB left interest rates unchanged on Thursday. President Christine Lagarde noted that a rate hike had been discussed, but policymakers ultimately reached a unanimous decision to keep borrowing costs on hold, arguing that tighter financial conditions are helping to contain inflation.