French Bond Yields Steady Amid Political Uncertainty

French government bond yields remained stable as investors awaited details on the new French parliament's composition after a strong left-wing showing in Sunday's election. Notably, the spread between French and German 10-year bond yields narrowed to its lowest in nearly a month before widening slightly.

French government bond yields remained largely unchanged on Monday, as market participants awaited further details on the composition of the next French parliament, following a surprisingly strong performance by left-wing parties in Sunday's election.

The yield on France's benchmark 10-year bond dipped slightly to 3.209%, continuing a retreat from last week's high of 3.37%. At the same time, German 10-year yields edged up by 1 basis point to 2.541%, narrowing the yield premium investors demand to hold French debt over German Bunds by 1 basis point to 66.6 bps.

The yield gap briefly touched a session low of 63.7 bps, the smallest spread since June 13. Furthermore, the leftist New Popular Front became the largest bloc in the National Assembly, leading to potential coalition negotiations as no single group achieved a majority. President Macron's alliance and the far-right National Rally also performed strongly.

(With inputs from agencies.)