France's 10-year bond yield climbed to 4.96% on Tuesday as investors braced for new protests after weekend riots, while Bitcoin (BTC) hovered near $83,000.
Key Points:
- France's 10-year yield rose to 4.96% on Tuesday, near a 24-year high, as protest groups called new demonstrations for Saturday.
- ING warned that any government will struggle to push through savings, while Citi flagged Tuesday's budget vote as a near-term signal.
- Bitcoin traded near $83,000 after U.S. spot Bitcoin ETFs drew their biggest daily inflow in nearly a month.
French Bond Yields
French borrowing costs extended their climb Tuesday, with the 10-year yield rising 3 basis points to 4.96%, close to its highest level in 24 years. The premium France pays over Germany on 10-year debt widened 5.5 basis points to 152.5 basis points, while Germany's own 10-year yield slipped 2 basis points to 3.43%. Protest groups have called a new round of demonstrations for Saturday.
The selloff started Monday, when the 10-year yield jumped 13 basis points and the blue-chip CAC 40 index fell 1.5%, compared with a 1% drop in broad European stocks. Shares of lenders BNP Paribas and Societe Generale each lost 3%.
Nationwide protests over high energy prices and school conditions turned into rioting over the weekend, with vandalism in cities including Paris, Marseille and Lyon, and authorities arrested nearly 2,400 people. President Emmanuel Macron rejected an offer to resign from Interior Minister Laurent Nunez. Nunez said the 60,000 officers deployed Saturday were not enough in some cities.
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Citi, ING Strategists
Citi European rate strategist Jamie Searle said Tuesday's vote on the revenue side of the budget bill "takes on a little more importance as a near-term signal." Polls published last week, before the riots, showed far-right leader Marine Le Pen and hard-left rival Jean-Luc Melenchon extending their lead, a scenario analysts see as the least favorable for deficit cuts.
Benjamin Schroeder, a senior rates strategist at ING, said "any government will struggle to implement the required reforms and savings against broader public resistance." Deutsche Bank's Jim Reid called the weekend "another layer of political risk for markets." Hank Calenti, a global market strategist at SMBC, said the protests signaled fading hopes for deficit cuts and pension reform.
Bitcoin ETF Inflows
Bitcoin traded between roughly $81,400 and $83,000 on Tuesday, touching $83,026 on Binance at one point, while Brent crude climbed above $111 a barrel. Investors added a net $526.6 million to U.S. spot Bitcoin ETFs on Monday, the largest daily inflow in nearly a month, led by $665.2 million into BlackRock's fund.
French borrowing costs peaked in early October, when the 10-year yield hit 4.9937%, its highest since July 2002, after a 70-basis-point jump in September.
The spread over Germany reached 158.67 basis points at the time, its widest since November 2011. Tuesday's move left French yields within 4 basis points of that peak.
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