France's 10-year OAT yield remained steady at just over 3.4%, hovering close to its lowest point since late November. This stability comes as investors prepare for the European Central Bank's (ECB) upcoming meeting, where officials are set to discuss the deflationary implications of a stronger euro. Policymaker Martin Kocher has recently warned that a continued appreciation of the euro might lead the central bank to resume cutting interest rates. Reflecting this sentiment, money markets now see about a 30% likelihood of a rate cut by September, a notable increase from less than 10% just a week ago. Conversely, the chance of a rate hike in April 2027 has decreased to 20% from 50%.
Politically, France's Prime Minister, Sébastien Lecornu, utilized a special constitutional measure to pass the 2026 budget bill through the deeply divided lower house without a vote, an action that is anticipated to provoke further no-confidence motions.
In terms of economic performance, France's economy experienced a growth rate of 0.2% in the fourth quarter of 2025, signifying the slowest quarterly growth since the first quarter of that year.
