French Bonds Steady Amid Political Uncertainty

As French President Emmanuel Macron navigates political turmoil, investors demand a marginally higher risk premium on French bonds compared to German Bunds. The yield spread remains stable with markets calm. Despite the political challenges affecting growth, economic impacts are limited. Global market attention turns to fiscal and monetary policies.

As investors anticipate political developments in France, the risk premium demanded for holding French government bonds over German Bunds widened only slightly. Despite President Emmanuel Macron's ongoing efforts to resolve the political crisis, the broader European market remained largely unfazed.

The focus on Friday was a critical meeting between Macron and political leaders, aiming to appoint a new prime minister by a self-imposed deadline. France's central bank highlighted political uncertainty's impact on growth, yet markets remained stable.

Globally, investors are cautious about fiscal policy, worried about a rise in long-dated yields, which could lead to curve steepening. This interplay between fiscal and monetary policies carries significant implications for future growth and inflation.

(With inputs from agencies.)