Euro zone bond yields rise as French borrowing costs hit 24-year high
TLT•Euro zone bond yields rose, with France’s 10-year yield reaching 5% for the first time since July 2002. The French-German 10-year yield spread widened to 150 basis points, the widest in the euro zone.
1. French yields climb
French 10-year bond yields rose 8 basis points on Wednesday to 5%, after gaining more than 20 basis points this week. The premium over German 10-year bonds reached 150 basis points, while German 10-year yields rose 4 basis points to 3.428%.
2. Unrest and budget concerns
Investors weighed widespread protests that are pressuring a government trying to shore up France’s finances. More protests are planned for Saturday, and companies are feeling the financial impact; Carrefour cut its operating profit margin growth targets because of the riots. A weakened government is also trying to push a budget through parliament and reduce the deficit ahead of next year’s election.
3. Oil and other bonds
Crude oil rebounded above $110 a barrel, adding to negative sentiment. Italian 10-year yields had risen 12 basis points this week, while their premium over German bonds widened 4 basis points on the day to 116 basis points.
