2026.01.2809:37:55UTC+00France’s Bond Yields Fall on ECB Comments and Budget Progress

The yield on France's 10-year OAT has declined to approximately 3.4%, reaching its lowest point since late November. This movement comes in light of comments made by ECB policymaker Martin Kocher, who suggested that if the euro continues to strengthen, the central bank might consider resuming interest rate reductions. Market expectations for a potential rate cut in the summer have increased slightly, with the probability of a 25 basis point cut in July rising to roughly 25% from about 15% previously. The euro has risen above $1.2 for the first time since June 2021, buoyed by a broadly weaker US dollar following President Donald Trump's remarks calling the dollar "great," even as it reached a near four-year low. Meanwhile, French bond yields have also decreased amid political developments, as investors have reacted positively to the government's efforts to progress with the 2026 budget. On Tuesday, the government survived two no-confidence motions over its strategy to pass the expenditure portion of the budget without a final vote from the National Assembly, following similar challenges on the revenue side last week. The complete 2026 budget will now proceed to the Senate before returning to the lower house for final approval.