French 10-Year OAT Near 14-Year High Amid Political Deadlock
The yield on France's 10-year OAT remains around 3.59%, a level close to the peak seen in September over the past 14 years, amid continuing political deadlock. After a brief tenure, Sébastien Lecornu, the shortest-serving Prime Minister of France's Fifth Republic, resigned unexpectedly. Subsequently, President Emmanuel Macron has entrusted him with overseeing two days of intensive negotiations with various parties to chart a path forward. President Macron may consider forming a new cabinet to seek parliamentary approval. However, there remains significant pressure for him to potentially dissolve the National Assembly and call for new legislative elections. In the background, credit rating agencies have expressed concerns regarding France’s sovereign credit. Fitch has cautioned that the prevailing political uncertainty could constrain efforts towards substantial fiscal reform, and indicated that failure to adopt such reforms—or a sustained increase in borrowing costs—might negatively affect the country's credit standing. Meanwhile, S&P Global underscored the urgency of the government successfully passing a budget as its foremost challenge.
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