French Bonds Under Pressure Amid Cabinet Shake-Up and U.S.-China Trade Developments
French government bond yields increased following Prime Minister Sebastien Lecornu's cabinet announcement. Roland Lescure was named finance minister, and market tensions heightened with political uncertainty and potential rating downgrades looming. Meanwhile, Europe watches U.S.-China trade dynamics after tariff threats and rare earth export controls, affecting investor risk appetites.
The yields on French government bonds rose on Monday following the unveiling of Prime Minister Sebastien Lecornu's new cabinet. Despite retaining most top positions, Lecornu appointed Roland Lescure as finance minister, a strategic ally of President Macron, amidst rising pressure to pass a stringent budget.
Amidst the political changes, strategists like Mohit Kumar from Jefferies express concern over potential early elections and rating downgrades from Moody's and S&P due to mounting political uncertainty. This is expected to trigger mandatory sales by Asian investors, solidifying Jefferies' underweight position on French bonds.
The bond market experienced further volatility as U.S. President Trump softened his proposed 100% tariffs on Chinese goods, a response to China's restrictions on rare earth exports. Thus, with ongoing public holidays in Japan and the United States, trading volumes remain thinner, impacting European bond yields.
(With inputs from agencies.)
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