FX.co ★ French Bond Yields Slip, Narrow Gap with Italy Amid Debt Concerns

The yield on France's 10-year government bond eased to 3.48% following the US Federal Reserve's recent decision to implement its first rate cut of the year. Fed Chair Jerome Powell addressed the change, suggesting it was meant as a precautionary measure given signs of a softening labor market. This action has quelled expectations for more drastic rate cuts, as Powell emphasized that there is no immediate urgency to further reduce rates. In parallel, eurozone policymakers have adopted a similarly careful stance. European Central Bank (ECB) officials continue to express concerns about tariffs, persistent service sector inflation, rising food prices, and ambiguous fiscal policies. Amid these developments, scrutiny over French borrowing costs has intensified. Notably, France's 10-year bond yields have now aligned with those of Italy, a convergence spurred by several months of increasing French yields, underpinned by anxieties over public debt sustainability and sluggish economic growth, all while Italy experiences a more optimistic investor outlook.