French bond yields rise, shrugging off dip in oil
TLT•French 10-year yields rose 4 basis points to 4.95%, while German 10-year yields fell 2 basis points to 3.35%. Money markets priced a near-90% chance of an ECB rate hike in December and fully priced a second by April.
1. Yields diverge
French 10-year OAT yields rose 4 basis points to 4.95%, after falling about 11 basis points on Monday. German 10-year Bund yields fell 2 basis points to 3.35% as oil prices dipped.
2. Investors weigh risks
French consumer morale fell to its lowest level since 2013 in early October. An economist quoted in the article said French fiscal policy was likely to remain a source of market tension while parliamentary proceedings continued. Investors have increasingly turned to German bonds as concerns grow about highly indebted euro zone countries’ ability to manage their debt as borrowing costs rise.
3. ECB expectations
Money markets priced a near-90% chance of an ECB rate hike in December and fully priced a second by April. The ECB was widely expected to leave rates unchanged on Thursday, with investors focused on any hints from President Christine Lagarde about the likelihood of future hikes.
