High-Stakes Confidence Vote Looms Over France's Financial Path

French investors focus on a no-confidence vote that threatens Prime Minister Michel Barnier's government while market expectations build around a European Central Bank rate decision. Barnier's controversial budget plan aims for savings to stabilize finances. The French bond market reacts with cautious stability.

French sovereign bonds experienced a tranquil phase on Wednesday as investors turned their attention to a critical no-confidence vote in France's parliament, potentially ousting Prime Minister Michel Barnier's government. This vote comes in the wake of his attempt to enact a contentious social security bill.

The fixed income market receded some gains following a brief martial law declaration in South Korea. Markets anticipate a 25-basis point interest rate reduction by the European Central Bank, with a 27% possibility of a more substantial cut.

Christine Lagarde of the ECB warned of potentially weaker euro zone economic growth, reinforcing expectations of an interest rate cut on December 12. The crucial parliamentary debate concerning Barnier's 2025 budget proposal starts at 1500 GMT, with decisions expected by 1900 GMT.

(With inputs from agencies.)