France’s 10-year OAT yield climbed to 3.54% on Tuesday, rebounding from Monday’s more than one-month low of 3.50%, as investors awaited the US inflation release for further guidance on monetary policy. Concerns over the Federal Reserve’s independence eased somewhat after several Republican lawmakers pushed back against a Justice Department criminal investigation involving Fed Chair Jerome Powell. In Europe, ECB Governing Council member François Villeroy de Galhau described expectations of an ECB rate hike this year as a “fanciful” misconception. On France’s public finances, he urged lawmakers to reduce the budget deficit to at least 5% of GDP this year, warning that anything higher would leave the country in the “danger zone.” Lawmakers failed to pass the 2026 budget by year-end, requiring temporary stop-gap measures, and negotiations resumed on Tuesday amid persistent uncertainty over the outcome.
