Moody’s Ratings kept France’s Aa3 credit rating Friday but retained a negative outlook, easing immediate pressure on the government as Reuters reported lower bond yields Monday amid a difficult 2027 budget fight.
Reuters put the French 10-year government bond yield at 4.976% in its Monday report, a decline of 4.5 basis points. The yield had reached 5.1415% Thursday, Oct. 22, the outlet reported.
Reuters linked the difficulty of passing the budget to the fragmented parliament produced by the 2024 snap election.
Moody’s said its rating assumes France will adopt a deficit-reducing 2027 budget. It also expects financing costs and social tensions to ease somewhat in the next few months, according to a statement quoted by Reuters.
The yield gap between French and German 10-year bonds narrowed by 5 basis points to 161 basis points, Reuters reported. It had reached its widest level since 2011 the previous week. The latest move follows French bond stress linked to euro weakness.
Saturday’s protests underscored the social pressure. France’s Interior Ministry counted 410,000 participants nationwide, while the CGT union put turnout at nearly 800,000. Most rallies remained calm during the day, but violence followed in Paris and Marseille, Reuters reported.
In a note cited by Reuters, Commerzbank rates strategist Rainer Guntermann said Moody’s decision should bring further relief to French bonds. He also said markets were growing wary that the European Central Bank (ECB) was already giving more attention to the drag from higher long-term yields.
The ECB is scheduled to announce its policy decision Thursday, Oct. 29, at 9:15 a.m. ET (13:15 UTC), followed by a news conference at 9:45 a.m. ET (13:45 UTC).
