The French 10-year rate is negative again

Posted on Jul 16, 2021, 1:49 PMUpdated on Jul 16, 2021, 5:32 PM

Since April, we thought that the exceptional period when France could earn money by going into debt was well over. The economic recovery and the sudden surge in inflation seemed to spell the end of a negative 10-year French government bond yield. On May 18, he even flirted with 0.30%, a level not seen since the peak of the Covid crisis in March 2020. And yet, this benchmark market rate was again passed at the end of the week in below zero.

Around noon on Friday, it was moving around -0.014%, still very close to the 0% threshold. But the descent could continue. “The bond rally started a few weeks ago, leading to a significant drop in rates,” says Jean-Christophe Machado, at Natixis. This increase in demand has pushed up bond prices. And when the value of a bond goes up, its rate goes down. “It was not our central scenario, admits the strategist. Rather, we expected interest rates to stabilize before the summer, then a resumption of the rise in the fall. “

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