07.10.202608:46:24UTC+00French OAT Yields Climb on Fiscal Concerns

France’s 10-year OAT yield climbed above 4.8%, moving back toward the more than two-decade high above 5% reached late last week, as fiscal worries persisted and oil markets returned to the fore. French borrowing costs have risen on the back of elevated energy prices, stubborn inflation and higher-for-longer rate expectations, with French debt hit especially hard by doubts over the government’s ability to curb spending ahead of the 2027 presidential election. Paris’s draft budget for 2027 includes politically sensitive spending cuts designed to narrow the deficit to 5% of GDP next year, but questions over the plan’s credibility and a fragmented parliament may hinder delivery of that goal. At the same time, Brent crude advanced as Iran stepped up attacks on shipping in the Strait of Hormuz, bolstering expectations of additional rate hikes by major central banks. Markets now expect the ECB to raise rates two more times by March 2027, while swaps are pricing in around 75 basis points of tightening by the end of next year.