French Bond Yields Edge Up but Post Weekly Decline

France’s 10-year OAT yield climbed above 3.65% by the end of a volatile week, yet remained on course for a 2-basis-point weekly decline, largely due to Wednesday’s sharp 21-basis-point drop. Despite this easing, borrowing costs across Europe stay elevated as US-Iran tensions escalate, jeopardizing a fragile ceasefire. The rising tensions have pushed oil prices higher, reigniting inflation concerns and reinforcing expectations of a more aggressive monetary policy from the European Central Bank. Markets have responded by pricing in at least two ECB rate hikes by the end of 2026, with a 30% probability of a third increase. Meanwhile, Iran continues its near-total blockade of the Strait of Hormuz, insisting on Lebanon’s inclusion in peace negotiations, while US President Donald Trump has criticized Iran’s handling of oil flows through the vital waterway. Pakistan is set to host talks between the two sides this Saturday.
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