European sovereign bond markets are facing sustained bearish pressure, and the published research consensus points squarely at France as the pressure point.
Multiple independent research notes this week converge on the same read: French OAT yields and the OAT-Bund spread are set to stay elevated or widen further. The core driver cited across the board is France's deteriorating fiscal trajectory — a minority government struggling to pass a credible budget, deficit targets that fiscal watchdogs view as optimistic, and debt interest costs that now exceed major spending lines. The OAT-Bund spread has already touched a peak of 159bps, which one analysis flags as sitting in the 99th percentile of daily moves since 1990.
Researchers also warn the stress is leaking into peripherals, with the Italy-Bund 2Y spread widening roughly 20bps on contagion. On ECB policy, a camp of analysts expects one more hike by December 2026, taking the deposit rate to 2.75%, citing sticky Eurozone inflation near 3.1% next year.
A contrarian thread argues the opposite at the short end: fragmentation fears and weaker growth are pulling German 2Y yields lower as markets price a more dovish ECB path.