Bonds: France Remains Under Pressure
The yield spread between French government bonds and German government bonds has reached its highest level since late 2011. Ahead of next week’s meetings of the Fed and the ECB, experts expect interest rates to remain unchanged for the time being, despite ongoing inflation risks.
October 23, 2026. FRANKFURT (Deutsche Börse). Bond markets are currently showing highly divergent trends. While yields on German and U.S. government bonds fell this week, the upward trend in France continued. Ten-year German government bonds were yielding 3.36 percent on Friday, down from 3.41 percent a week ago. At the start of the week, the yield had even reached as high as 3.47 percent. The yield on 10-year U.S. Treasuries fell over the course of the week from 5.09 to 4.97 percent. French government bonds with the same maturity are now yielding around 5.10 percent. Yields were last this high in May 2002.
“Fears of a correction in the stock markets are driving investors toward safe government bonds and pushing yields down,” explains Tim Oechsner of Steubing AG. Raffaele Antacido of ICF Bank also confirms the increased demand for German government bonds and U.S. Treasuries. French government bonds, on the other hand, remain under pressure. The reasons include high public debt, budget problems, and political instability.
Purchases Despite the Crisis in France
The yield spread between 10-year French government bonds and comparable German government bonds widened at times on Thursday to just under 1.78 percentage points. This is the highest level since late 2011, when the eurozone debt crisis shook the markets. Moody’s is set to review France’s credit rating on Friday evening. The rating agency currently rates the country at Aa3 with a negative outlook.
Despite the tense situation, buyers for French government bonds can be found on the Frankfurt Stock Exchange. Gregor Daniel of Walter Ludwig Wertpapierhandelsbank reports on “bold investors” who have purchased small quantities of a French bond maturing in 2057 (FR0014016CV2). Its price has fallen from 100 percent to 84 percent within four months. The yield currently stands at 5.5 percent. There is also interest in a French government bond maturing in 2038, which is trading at 90 percent and yields 5.2 percent (FR0010371401).
Gregor Daniel
The Fed and the ECB Are Likely to Take a Wait-and-See Approach for Now
High energy prices and growing tensions in the government bond market are making it difficult for central banks to make their next decisions. This coming Wednesday (October 28), the U.S. Federal Reserve (Fed) will announce its policy rates, followed a day later by the European Central Bank (ECB). Robert Greil of Merck Finck does not expect any further interest rate moves for the time being. “We do not expect any interest rate changes next week from either the Fed or the ECB, but we still consider another rate hike in December to be likely for both,” explains the chief strategist. In the U.S., persistently high inflation would actually argue for a rate hike. However, given that the midterm elections are just six days later, the Fed is likely to exercise restraint.
A recent Bloomberg survey shows just how widely opinions differ on future interest rate trends. The majority of economists surveyed expect the ECB to raise the deposit rate by 25 basis points to 2.75 percent in December—the final hike in this cycle. The markets, on the other hand, are pricing in three more rate hikes for the coming year.
Telekom and Fresenius Bonds Traded Actively
In corporate bond trading, Antacido reported high trading volumes in a Deutsche Telekom bond maturing in 2034 (XS2024716099) with a yield of 3.9 percent. Bonds from L'Oréal (FR0014014A46) and Volkswagen Bank (XS2617456582) were also in demand.
Oechsner lists other actively traded corporate bonds. Among them is a Fresenius bond (XS3435668325) maturing in 2031, which currently yields 4.1 percent. A Fraport bond (XS2198879145) maturing in 2027 offers the same yield. An E.ON bond (XS2673536541) maturing in 2029 and yielding 3.5 percent was also frequently traded. The subscription period for the new Katjesgreenfood bond (NO0013759555) has now ended. The bond, which matures in 2031 and has a coupon of 8.0 percent, has been traded on the open market since October 20 and has already been purchased several times.
By Thomas Koch, October 23, 2026, © Deutsche Börse AG
About the Author
Thomas Koch is a CEFA investment analyst, an investment specialist in structured products, and a certified certificate advisor. Since early 2006, he has been covering developments in the capital markets as a freelance journalist.
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