Minimum confidence in the current tense market of European state bonder Nicola Mai, a bond analyst at the US Pimco Capital Management Company on the occasion of political instability in France and the increase in yields of French government bonds.
“At present, we are focusing on long -term government bonds from the US and the United Kingdom,” Mai told Handelsblatt. “We are more careful in the Eurozone.” Pimco is part of the Allianz Group and manages assets totaling $ 2.1 billion. The US company is one of the largest bond management managers in the world. Bond prices from many European countries (along with France) have recently been pressured.
On the contrary, the yields of German 10 -year Bund bonds have increased significantly in the last three months – by more than 0.12 percentage points to 2.73%. French government bonds increased by a quarter of the percentage percentage during the same period today at 3.58%.
Mai is mainly concerned about the impact of falling interest rates on the medium -term securities for about five years. In both the US and the Eurozone, such bonds are preferred in the middle of the yield curve, he says.
“The European Central Bank (ECB) has already moved further into its interest rates, while the Fed and the England Bank still have plenty of room to do so,” Mai says. The relevant expectation: If the basic interest rate is reduced, the yields of the respective government bonds will also be reduced and prices will rise in turn. The ECB has reduced the basic interest rates in the eurozone eight times since June 2024, but more recently left them in two percent.
Fidelity’s strategic analyst warns of political influence on Fed
In the US, however, the Federal Bank reduced its main interest rate to a range of 4.0 to 4.25 in September. The Bank of England’s main interest rate also remains high in four percent. Analysts expect further interest rates in the US in the coming months.
Other major investors are more critical of US government bonds. Carsten Roemheld, Capital Market Strategic Analyst at Fidelity International Capitalhe says: ‘US government bonds are subject to significant political influences’. It is likely, he says, that a US federal bank under pressure could buy in the long run government bonds to reduce the burden of government interest.
According to Roemheld, this would weaken the dollar and be unattractive to the eurozone investors. “So we feel more comfortable in the Eurozone”, says Fidelity’s strategic analyst. US President Donald Trump has repeatedly tried to influence the Fed’s decisions in recent months.
However, Pimco’s strategic analyst, Mai, is generally cautious about the very long -term 30 -year -old government bonds. In addition to global uncertainty, it expects that the US and Germany will issue more long -term bonds next year. ‘The yield curve will become even more steeper’, He says. The yield curve will become steeper if the differences between long -term and short -term bonds is expanded. Bonds with lower interest rate coupons already on the market will then become less attractive – they will be at risk of price loss.
French government bonds remain dangerous
In the eurozone, Pimco’s Mai is particularly cautious about French government bonds. The reason is the abundant state spending of France: the budget deficit is high. Nothing will change about the high French deficit in the near future, according to Mai. The analyst obviously has no hope of improvement at the moment.
France’s fiscal situation is firmly deteriorating lately. Last year, the deficit was 5.8% of the gross domestic product, from 5.4% in the previous year. National debt now exceeds 110%.
The resignation of French Prime Minister Sebastian Lekorni on Monday, October 6, 2025, after just a few weeks in office, further worsened the situation. Since the beginning of the week, yields of decade of French government bonds have increased by approximately 0.07 percentage points, and prices have declined. French President Emmanuel Macron re -entrusted to Lecorne the formation of a government on Monday.
Analysts believe that this has increased the possibility of new elections. According to Neil Mehta of RBC Bluebay Asset Management Assets Management Company, the resignation of Lekornos has plunged France into yet another political crisis. If early elections were announced, he estimated that spreads between French government bonds and German bonds could be expanded to a percentage point. The current spread for the ten -year bonds is 0.85 percentage points.
“France is facing a deadlock until the presidential election,” says Roweld, a strategic analyst of Fidelity. It is likely that one prime minister has been exhausted by the other. “French government bonds will probably continue to suffer as a result,” Roweld says.
The dangers, however, are limited, he says. “I don’t think we will see a euro crisis because of that.” Mai also sees no risk of transmission in other European bond markets. He says: “France is an isolated case.”