France's 10-year OAT yield recently rose above 3.4%, maintaining its position near the peak recorded since October 13. This rise comes as investors focus on France's budget negotiations, hawkish tones from the European Central Bank (ECB) and the Federal Reserve, and a recent decrease in inflation rates. Olivier Faure, leader of the Socialist Party, expressed his intention to reach a compromise with the government concerning the 2026 budget. He pointed out that the preliminary draft is "already starting to improve," with provisions such as an increased corporate tax rate for large companies.
In economic data, French inflation cooled to 1% in October, down from 1.2% in September, falling short of the anticipated 1.1%. The country's GDP showed a robust growth of 0.5% in the third quarter, marking the fastest expansion in over two years and surpassing predictions of 0.2%. This growth was driven by heightened exports and strong domestic demand.
On the monetary policy front, the ECB has kept interest rates unchanged for the third consecutive meeting, describing its current stance as "good." Meanwhile, Federal Reserve Chair Jerome Powell cautioned that further rate cuts slated for December are "not a foregone conclusion."
