French government bond yields edged higher on Tuesday as relief over Moody's decision to keep France's credit rating faded. Investors now look to Thursday's European Central Bank meeting, where markets widely expect no change in rates.
France's benchmark 10-year government bond yield ticked up to 4.922% on Tuesday. It recovered modestly after its sharpest single-day decline since May on Monday, after Moody's affirmed the country's Aa3 rating late last week.
Meanwhile, the gap between French and German yields also moved. The spread between 10-year French OATs and German Bunds tightened by 13.8 basis points to 153 basis points, the largest single-day narrowing since March 2020.
German yields hold flat before the ECB
German bonds saw subdued trading as investors positioned ahead of Thursday's central bank decision. The German two-year yield was virtually unchanged at 3.064%, while the 10-year Bund yield held flat at 3.349%.
Money markets widely expect the ECB to leave its deposit facility rate unchanged at 2.50%, after hikes in June and September to counter energy price shocks tied to conflict in the Middle East. Crude prices are holding near multi-month highs above $100 a barrel, and interest-rate futures price in an approximately 80% probability of another 25-basis-point rate hike in December, which would lift the policy rate to 2.75%.
Israeli yields jump as voters head to the polls
Israel headed to the polls on Tuesday, October 27, 2026, to elect all 120 members of the 26th Knesset. The yield on Israel's benchmark 10-year note advanced to a one-week high of 4.067%, its largest single-day jump in nearly a month.
According to Deutsche Bank analysts: "This is potentially a much more important one for global markets." The bank's economists see on the table everything from another Netanyahu-led government to an opposition or unity government, political deadlock, and potentially another election.
Source: Investing.com
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