Debt: the French 10-year rate becomes positive again

Posted on Apr 19, 2021, 5:52 PMUpdated Apr 19, 2021, 6:38 PM

Negative rates in France could soon be a thing of the past. The yield on 10-year OATs – French government bonds – rose above 0% on Monday afternoon, for the second time this year. It hit 0.03%, its highest since June 2020, before falling back to 0.01%. Already, in February, it had crossed upwards the symbolic bar of 0%. At the time, it was mainly a contagion effect. US rates had jumped on fears of an explosion in inflation after the adoption of the mega stimulus package wanted by Joe Biden.

But this time around, the causes seem deeper. This is not a reaction to the recent explosion in state debt, but rather a renewed optimism about the economic prospects of the Old Continent. The movement hits all European sovereign bonds, while US Treasuries are spared. The acceleration of vaccination programs in Europe suggests a faster-than-expected restart of activity. Investors therefore feel less need to focus on safe havens such as government bonds.

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