Euro Zone Yields: French-German Spread Widens Amid Rate Cut Speculation

The spread between French and German 10-year yields reached its widest in seven weeks due to rising speculations of an ECB rate cut in October. French yields lagged, impacted by domestic political concerns. However, expectations of monetary easing have bolstered bond prices, with Germany's yield falling to 2.14% and France's to 2.94%.

The spread between French and German 10-year yields reached its widest in seven weeks on Thursday, as expectations that the European Central Bank (ECB) could cut rates in October boosted bond prices overall. However, French bonds lagged amid domestic political concerns.

Germany's 10-year yield fell by 5 basis points to 2.14%, while France's 10-year yield decreased by 3 basis points to 2.94%. The spread, reflecting the risk premium for holding French debt over the euro zone benchmark, hit 82 basis points, the widest since August 5.

Investors are closely monitoring French yields, which rose above Spain's for the first time since 2008 on Tuesday, amid concerns over France's ability to manage its budget deficit. Meanwhile, France's new finance and budget ministers announced plans to focus on spending cuts first, followed by tax increases, to address the fiscal shortfall.

(With inputs from agencies.)