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- France's 10-year OAT yield rose 8 basis points on Thursday while the German 10-year Bund yield fell 6 basis points, pushing the spread to 135 basis points — well above its typical 50-80 bps range of recent years
- Credit default swaps on French sovereign bonds soared to a 13-year high, signaling investors now price French credit risk as a distinct concern rather than a eurozone-wide one
- The euro dropped 0.9% to $1.1231, marking its weakest level against the dollar in approximately five months
- The 2-year U.S. Treasury yield fell 7.5 basis points to 4.81% as traders continued to unwind bets on another imminent Fed rate hike
- Odds of a Fed rate move in October collapsed to 33.8% from roughly 70% earlier in the week — a dramatic repricing in just days
- ZeroHedge invoked the European sovereign debt crisis, writing 'it's been a while since we had' one, framing France's bond deterioration as reminiscent of past eurozone stress events
Why it matters: France's bond market is decoupling from Germany's at a pace not seen in years, with 13-year-high CDS spreads signaling investors are repricing French sovereign risk as a standalone problem — not a eurozone-wide one. The simultaneous collapse in Fed hike odds from 70% to 33.8% in days shows global bond stress is already reshaping U.S. rate expectations, with traders pulling forward the timeline for Fed easing.
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