August 28, 2025

French bond yields got a little relief on Wednesday after soaring to levels not seen since 2011. What caused this rollercoaster? Political chaos in France and nerve-racking drama in the US! France's 30-year bond yield paused slightly at 4.38%, down just 1 basis point after a sharp rise sparked by worries about the government's future. Prime Minister Francois Bayrou shocked markets by announcing deep budget cuts. But his plans hit a wall when main opposition parties said they wouldn’t support a confidence vote set for September 8. This opposition threw the idea that Bayrou’s minority government could fall into the spotlight, igniting a selloff in French stocks and bonds. Meanwhile, across the Atlantic, President Donald Trump stirred up global market jitters by trying to fire a Federal Reserve Governor. This raised serious fears about the independence of the US central bank, a worry spreading fast among investors worldwide. In a twist, Fed Governor Lisa Cook promised she will legally fight to keep her job. A lawyer for Cook confirmed, "Lisa Cook will file a lawsuit to prevent Trump from firing her." Back to Europe, the French 10-year yield inched down to 3.49%, after reaching a five-month high on Tuesday. The benchmark German 10-year bond yield dipped 1.2 basis points to 2.71%. Investors keep a close eye on the gap between French and German 10-year yields, which reflects the extra risk of holding French debt. This difference fell slightly to 77 basis points from a high of 79 basis points, the largest since April. Another interesting note: the difference between French and Italian bond spreads narrowed sharply to just 8 basis points. That’s huge, considering it was over 150 points two years ago! To sum it up, investors are jittery as French political troubles mix with rising fears about central bank independence from the US. Will the markets steady soon? Only time will tell, but for now, bond yields are taking a cautious little step back after a wild ride.

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Tags: French bond yields, Political uncertainty, Prime minister bayrou, Federal reserve, Trump, Central bank independence,