French Political Turmoil Sends Investors Fleeing to German Bonds

The political instability in France, with a likely collapse of the government, has widened the risk premium for French debt compared to German Bunds. Investors are flocking to safe-haven German bonds amid concerns about budget deficits. Meanwhile, German yields are slightly up after a streak of decline.

The political landscape in France is on shaky ground, sending ripples through the financial markets. Investors are demanding a hefty risk premium on French debt over German Bunds amidst fears of a collapsing government.

Prime Minister Michel Barnier's fragile coalition is on the verge of being ousted by a no-confidence vote, threatening fiscal plans. The German bond market responded with slightly higher yields after an eight-day decline as investors sought safety in Bunds.

Despite the turmoil, economic experts reassure that France's wealth allows it to mitigate deficits. Meanwhile, the European Central Bank's anticipated interest rate maneuvers continue to influence the yields on German government bonds.

(With inputs from agencies.)