Euro zone bond yields diverge again; France, oil prices in focus
TLT•Euro zone bond yields diverged, with Italy’s 10-year yield rising about 9 basis points to 4.6261% and France’s climbing 9.7 basis points to 4.8437%; Germany’s yield rose 1.6 basis points to 3.4969%. Brent crude moved back above $100 as traders weighed supply constraints and increased Middle East supplies.
1. Yields diverge
Yields on euro zone bonds rose Wednesday, with those of more indebted countries climbing more sharply than German yields. Italy’s 10-year yield rose about 9 basis points to 4.6261%, while France’s gained 9.7 basis points to 4.8437%; Germany’s was up 1.6 basis points at 3.4969%.
2. French fiscal concerns
Worries about France’s fiscal situation ahead of the 2027 presidential election kept investors on edge. The spread between French and German 10-year yields was around 134 basis points, after exceeding 158 basis points on Friday, its highest since late 2011. Commerzbank rates strategist Erik Liem said he remained cautious on French bonds versus German ones, saying “the fundamental backdrop has hardly improved.”
3. Oil and rate expectations
Brent crude futures were back above $100 as traders weighed supply constraints from a storm heading for U.S. oil-producing regions and attacks by Yemen’s Iran-backed Houthis on Saudi Arabia against increased Middle East crude supplies. Traders had cut expectations for European Central Bank rate hikes; pricing ticked higher Wednesday, with roughly two increases priced in by the March meeting, still below previous expectations.
