French bond risk is the standout call in this week's European rates research.
The published consensus is that the France-Germany 10-year yield spread stays wide or widens further. Researchers point to France's recent rating downgrade, stubborn deficits, and little appetite for reform heading into the presidential election cycle. Several analyst notes flag the OAT-Bund spread already sitting around 100bp, with one camp expecting it to hold there at least until the French vote given no real fiscal consolidation in sight. Another thread highlights German political instability as an added amplifier, with the gap already stretching to 105bp.
On Bund yields themselves, views split by scenario. One line of recent research argues yields could fall if diplomatic progress on Iran eases energy prices and cools ECB hike expectations. A contrarian read points out that sticky eurozone data and hawkish ECB signals are keeping short-end euro rates elevated regardless. Peripheral spreads outside France could tighten if geopolitical risk fades — the French story is treated as its own problem.