The yield on France's 10-Year OAT stood at around 3.3%, below the two-month highs reached earlier in the month, tracking a global decline in bond yields. This movement followed President Trump’s decision not to impose tariffs on Inauguration Day, as many had anticipated, although he later signaled plans for a 25% levy on Canada and Mexico starting February 1st. In Europe, ECB policymakers have urged caution regarding further rate cuts. The ECB is expected to continue its easing cycle next week and market forecasts suggest additional rate cuts, potentially leaving rates above 2% by the end of 2025. In France, the budget debate continues, as the newly nominated government faces once again the challenge of passing the budget bill through a divided parliament. The spread between French and German yields, which reflects the risk premium for holding French debt, stood at around 80bps. This compares to 50bps in May of last year, before President Macron called a snap election.
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