The chaotic political situation in France is in fact affecting the entire Eurozone, as Treasury bond portfolios are being reshuffled across the continent.

One of the most emblematic 'markers' is the fact that the yield on Portuguese 10-year bonds has fallen below that of our OATs: investors therefore seem to consider Lisbon's issues to be safer than ours, even though they have a much higher rating ('AA' vs. A-... but it was recently BBB+ for Standard & Poors).... but this was recently BBB+ for Standard & Poors).
The yield on the Portuguese 10-year bond (3.1800%) is now slightly lower than our OATs (which are fluctuating this Thursday evening between 3.18 and 3.1820%).


In Europe, Bunds improved by -5pts to 2.471% and continue to gain ground against our OATs, which gained +2pts, i.e. a +70pt spread (versus 49pts last Friday, i.e. +21pts), the worst spread seen in 7.5 years (January 2017).

The session promised to be poor in macroeconomic indicators on the Old Continent, but the publication of industrial production in the eurozone disappointed, with a 0.1% decline deemed 'unexpected'.

On the other hand, it rose by 0.5% in the EU (so it's Germany and France that are down), compared with March 2024, according to estimates from Eurostat, the European Union's statistical office.

Consumer prices in Spain, calculated using harmonized European standards, rose by 3.6% year-on-year in May, confirming an initial estimate provided at the end of last month.
Ten-year "Bonos" are slightly up (+1Pt) at 3.37% (barely 20Pts separate them from our OATs).

Across the Atlantic, T-Bonds continue to ease in the wake of Tuesday's session (-4.3Pts to 4.25%), with the "2-year" erasing -7Pts to 4.6850%.
The day's US figures only serve to reinforce US investors' confidence in disinflation: US producer prices (PPI) unexpectedly fell by -0.2% in May (to +2.2% year-on-year) due to lower energy prices, according to statistics released by the Labor Department on Thursday.

Economists were forecasting a 0.1% month-on-month rise (after +0.5% in April).

The 'core' index, which measures underlying pressure on producer prices (excluding food, energy and commercial services), was perfectly stable last month, following a gain of 0.5% in April, and stands at +3.2% over 12 months.

The Labor Department announced that 242,000 new US jobless claims were registered in the week to June 3, up 13,000 on the previous week.

The four-week moving average - more representative of the underlying trend - came in at 227,000, up by 4,750 on the previous week.

But these "encouraging" figures were hampered by Jerome Powell's comments, which dashed investors' hopes of monetary easing.

His new interest rate projections - the famous "dot plots" - now show only one rate cut in 2024, compared with three up to now.

Of the 19 members of the Monetary Policy Committee (FOMC), four expect no rate cuts this year, seven expect one and eight expect two.

'This FOMC isn't really a game changer (...) but it is a little more hawkish than expected", comments Bastien Drut, head of strategy and economic research at CPRAM.

"Powell is making an effort to decentralize Fed policy from the price stability mandate and to focus a little more on the labor market", adds the economist.


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