French government bond yields extend their rise, US Treasuries sell off
LONDON, April 6 (Reuters) – France’s borrowing costs extended their rise on Wednesday as markets worried about the country’s presidential election, while U.S. Treasuries extended their selloff as investors were waiting for the minutes of the last Fed meeting.
Stock markets were down as traders eyed the possibility of aggressive monetary policy tightening from the US Federal Reserve.
US Treasury yields hit multi-year highs, extending the sell-off that saw the US 10-year yield rise more than 50 basis points last month on expectations of Fed rate hikes.
Analysts have partly attributed the latest move higher in yields to Fed Governor Lael Brainard, saying she expects a combination of interest rate hikes and a rapid runoff from the balance sheet to bring US monetary policy to a “more neutral stance” later this year, with further tightening to follow as needed.
Investors are waiting for minutes from the Fed’s March meeting, scheduled for 6:00 p.m. GMT, to provide clues on how quickly the Fed could reduce its bond holdings and raise interest rates.
At 07:38 GMT, the 10-year US Treasury yield was up 7 basis points on the day to 2.62%, after hitting a three-year high of 2.633% earlier in the session.
Meanwhile, in Europe, the benchmark German 10-year bond yield rose 3 basis points, to 0.638%, holding just below last month’s high .
France’s 10-year yield extended its gains to its highest since 2015 at 1.194%, as investors worried about the risks that far-right candidate Marine Le Pen will beat Emmanuel Macron in this presidential election. this month. The first round vote will take place on Sunday.
“From a market perspective, a second term for Macron would likely be viewed as representing stability and continuity, and viewed as the most benign outcome. In contrast, a Le Pen victory would likely be viewed very negatively by the market. given its Eurosceptic leanings,” RBC analysts wrote in a note to clients.
“We believe the risks from the election in the event of an adverse market reaction (are) still high.”
France’s 5-year yield was near its highest since 2014 and the 30-year yield was near its highest since 2019.
The spread between French and German 10-year rates – which on Tuesday reached its widest since April 2020 – has narrowed somewhat. Still, at 53.4 basis points, it sits at levels not seen since 2020. (Reporting by Elizabeth Howcroft; Editing by Bradley Perrett)