French Political Turmoil Influences European Bond Market

The French government's imminent collapse has heightened the risk premium on its debt, nearing 12-year highs. Investors are favoring German Bunds as safe-haven assets amid political instability. This market volatility impacts ECB rate expectations and bond yields across the euro area, notably in France and Germany.

Amid escalating political tensions in France, the risk premium on French debt has reached its highest point in over a decade, signaling investors' growing concern over the nation's stability.

The potential fall of Prime Minister Michel Barnier's coalition government has led to increased demand for German Bunds, viewed as a safer investment option in comparison.

The financial markets are also reacting to this political instability by adjusting expectations for European Central Bank monetary policy moves, affecting bond yields across the eurozone.

(With inputs from agencies.)