Yields on French bonds rose slightly, while the spread with German ones narrowed after Moody’s rating was affirmed. Market attention is focused on the ECB meeting and the results of the Knesset elections.
On Tuesday, yields on eurozone government bonds remained in a narrow range. The cost of borrowing for France increased slightly after the strongest decline in five months, while the yield difference between French and German securities narrowed at the fastest pace in more than six years.
Moody’s affirmed France's sovereign rating at Aa3. After that, yields on ten-year French bonds rose to 4.922 percent, recovering part of Monday's decline. Two-year French securities remained stable after a sharp decline at the beginning of October. The spread between French OAT and German Bund narrowed by 13.8 basis points to 153 basis points — this is the sharpest one-day narrowing since March 2020.
German bonds showed restrained dynamics. Yields on ten-year securities stabilized at 3.064 percent, and on thirty-year ones at 3.349 percent. Investors took positions ahead of the European Central Bank's decision.
Market participants' main attention is focused on the ECB meeting on Thursday. The regulator, according to most analysts, will keep the deposit rate at 2.50 percent. However, high oil and gas prices maintain risks for inflation. Futures price in about 80 percent probability of a 25 basis point rate hike in December.
Elections in Israel, held on October 27, 2026, had a separate impact on the market. Yields on Israeli bonds rose sharply and reached a weekly high of 4.067 percent. Deutsche Bank analysts note that the election results could lead to different scenarios — from a government led by Netanyahu to a political deadlock or new elections.