Eurozone government bond yields rose slightly on Wednesday. French papers resumed their price decline after Moody’s decision, and German debt fell amid data on consumer confidence.
Eurozone government bond yields rose on Wednesday ahead of meetings of the Federal Reserve System and the European Central Bank. Benchmark French papers resumed their price decline after a brief relief associated with the rating agency's decision.
French ten-year yield rose to 4.965 percent. Short-term French papers showed similar dynamics, reaching 3.768 percent. Investors remain wary of French credit risk due to parliamentary resistance to measures to cut the budget deficit of 5.4 percent of GDP and ongoing street protests.
Market Securities Wealth Investment Director Louis Gargour noted that the long-term sustainability of fiscal policy is becoming an important factor. High debt burden and social tensions raise questions about the trajectory of public finances.
German government bonds traded with a slight price decline. Ten-year yield rose to 3.082 percent, and another key yield reached 3.382 percent. This coincided with the publication of data showing a deterioration in consumer sentiment in Germany.
The leading consumer climate index calculated by the Nuremberg Institute for Market Decisions and GfK fell to minus 30.8 points in November from minus 30.6 in October. Households are sensitive to high utility tariffs.
The Federal Open Market Committee is expected to keep the target range for the federal funds rate at 3.75–4.00 percent. Markets are pricing in an 80 percent probability of a 25 basis point rate hike in December. The Fed's stance will set the tone for the ECB meeting, where the base deposit rate is likely to remain at 2.50 percent.