France’s 10-year OAT yield eased toward 3.7%, retreating from multi-year highs as investors reassessed growth risks stemming from the energy shock linked to the Middle East conflict. Despite this late-month pullback, yields remained on course to finish March more than 50 basis points higher, reflecting a broad-based surge in inflation.
Soaring energy prices drove Eurozone inflation up to 2.5%, surpassing the ECB’s 2% target, while France’s EU-harmonized inflation rate rose to 1.9% in March, its highest level since August 2024. In response, markets unwound expectations of imminent ECB rate cuts and are now pricing in at least two rate hikes by 2026.
French central bank governor François Villeroy de Galhau reiterated the ECB’s determination to bring inflation under control, while stressing that it was still too early to discuss the precise timing of future interest rate moves.
