France’s 10-year OAT yield fell to 3.49%, its lowest level since early December, as the country struggles to pass its 2026 budget. ECB Governing Council member François Villeroy de Galhau urged lawmakers to reduce the budget deficit to at least 5% of GDP, warning that higher levels would place France in a “danger zone.” Lawmakers missed the year-end deadline, prompting temporary stop-gap measures, while negotiations resume amid ongoing uncertainty. On monetary policy, markets continue to expect ECB rates will remain on hold throughout 2026, supported by a resilient Eurozone economy and inflation at target. Meanwhile in the US, investors weighed stronger-than-expected retail sales against a softer-than-expected core inflation reading, considering the implications for Federal Reserve rate cuts later this year.
