French borrowing costs rise sharply as growth slows ahead of more protests
TLT•French 10-year government bond yields rose 6 basis points to 4.944% after data showed the economy shrank 0.1% in the third quarter and inflation rose more than expected. The yield gap over German bonds widened to 160 basis points.
1. French yields climb
French borrowing costs rose on Friday after data showed the economy unexpectedly contracted in the third quarter and inflation rose more than anticipated. The 10-year yield increased 6 basis points to 4.944%, while German 10-year yields fell 1 basis point and Italian yields rose 2 basis points. The spread between French and German yields widened to 160 basis points.
2. Economic and protest pressure
The data added pressure on the government ahead of planned protests over demands for higher public spending. French Interior Minister Laurent Nunez said Saturday was looking like “a very high risk” day for public order and said 70,000 security personnel would be deployed.
3. Rate expectations and bonds
Money markets priced in roughly a 90% chance of an ECB rate hike in December after the central bank held rates at 2.5% on Thursday and hinted at an increase. U.S. 10-year Treasury yields fell 6 basis points as investors sought safe-haven assets.
