French government bonds are flagged as the standout underperformer in Europe right now, according to research published this week.
The core argument from one strand of recent analysis: the spread between French 10-year OAT yields and German Bunds has already widened sharply over the past month, and it hasn't peaked yet. The upcoming French budget debate is the catalyst — researchers point to real political tail risks, including a possible no-confidence vote or snap election, layered on top of France's already heavy debt load. On a tactical horizon of the next few weeks, the view is that French yields keep climbing.
The wider rates backdrop isn't helping either. The published consensus sees eurozone inflation as sticky and growth as resilient, with another 25bp ECB hike pencilled in for December 2026, taking the policy rate to 2.75%. That would keep broad upward pressure on European rates and on longer-dated spreads.
Bottom line from this week's research: no floor yet in sight for the OAT-Bund spread.