Euro zone yields edge up as French PM Lecornu survives no-confidence votes

Euro zone bond yields edged up on Thursday, breaking a four-day rally in prices that has driven borrowing costs to their lowest in months, with France in focus after Prime Minister Sebastien Lecornu survived two no-confidence votes in parliament. The French government was reprieved after a pledge by Lecornu to suspend a landmark reform of the pension system won him the support of some left-wing lawmakers.

Yields edged up after a week dominated by renewed concerns about the impact of U.S. President Donald Trump's trade policies on underlying economies, as tensions between Washington and Beijing have risen. That drew in safe-haven flows into bonds. Ten-year German Bund yields are set for their fourth weekly decline, the longest such stretch since late March, having fallen for four straight days to their lowest in more than three months. On Thursday, yields were up 1.9 basis points at 2.579%.

Long-dated bonds, which have generally been hit harder this year than shorter maturities by concerns about long-term government finances, have also attracted demand. ING strategist Michiel Tukker believes smaller sales of government bonds over the coming weeks could also be playing a role in the decline in yields.

"Bund yields are falling by more than equities would justify. From the demand side, we may have more investors seeking safe havens from market turmoil, whilst from a supply perspective, we see very little net issuance in October versus other months," he said. Yields on French 10-year bonds, or OATs, are set for their largest weekly fall of 2025, as investors take heart from Lecornu's decision to suspend pension reforms which may give him a better chance of passing a belt-tightening budget.

Benchmark 10-year OAT yields have fallen 14 bps this week, the most in a year, to 3.34%. They are still among the highest in the euro zone, but have retreated fairly consistently from the multi-month highs of early October around 3.6%. ($1 = 0.8582 euros)