Shockwaves in the Eurozone: French Political Crisis Impact on Bond Markets
Eurozone bond yields increased following the unexpected resignation of French Prime Minister Sébastien Lecornu, escalating a political crisis in France. This has widened the spreads on French government bonds. Meanwhile, Japanese bond yields retreated from highs as Eurozone yields continued to be pressured.
The eurozone bond market reacted swiftly on Tuesday after French Prime Minister Sébastien Lecornu's unexpected resignation heightened political instability in France, Europe's second-largest economy. Lecornu's departure, just hours after unveiling his cabinet, has resulted in French President Emmanuel Macron instructing him to engage in critical discussions with multiple political parties.
Markets were immediately impacted, with the German 10-year bond yield climbing 2.6 basis points to 2.74%, and the French 10-year yield also rising to 3.59%, reflecting investor uncertainty. The yield spread between German Bunds and French government bonds showcased a premium demanded by investors, reaching its highest point since January 13.
In contrast, Japanese government bonds saw a retreat from record highs after a successful 30-year bond sale. Despite concerns over Japan's fiscal policy direction, the eurozone's bond yields feel sustained pressure, particularly with Germany’s industrial output facing a downturn in August due to a weakened car sector and decreasing global demand.
Google News