French Bonds Stir Amid Government Turmoil
France's government fell as investors gauged risks in French bonds post-collapse. The yield gap between French and German bonds widened slightly, reflecting uncertainty. President Macron seeks a new prime minister, while economists view European implications with concern. U.S. inflation data remain pivotal to global monetary forecasts this week.
French government bonds faced modest selling pressure on Tuesday following the collapse of the French government. Market watchers awaited President Emmanuel Macron's next steps, which could include a snap election. The minority government was ousted after a no-confidence vote in parliament over plans to address national debt issues.
The yield gap between 10-year French bonds and Bunds widened by 5 basis points to 82 bps, attributed partially to changes in the benchmark bond. Concerns lingered that any new government might struggle to reduce public debt effectively, prompting higher risk premiums.
Analysts worry about political inertia in Paris affecting both France and the broader EU. Markets also turned their focus to upcoming U.S. inflation data, essential for the Federal Reserve's monetary policy direction, with the 10-year U.S. Treasury yield rising to 4.07% in London trading.
(With inputs from agencies.)
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