OATs are down significantly (yield up +6Pts to 3.0340%, i.e. +16Pts hebdo) but this seems to have no real connection with the appointment of François Bayrou, after 'stormy exchanges' with President Macron in the morning (all the press is echoing this).
François Bayrou represents 36 deputies out of 577 in the Assembly and is part of the coalition defeated in the European and legislative elections: the question is 'how long before he is censured'?
The Socialist Party has announced that it will not participate in the government, the RN will not 'censure on principle'... unlike LFI, which denounces a denial of democracy.
But the legitimate questioning of the political survival of a Bayrou government seems almost secondary to the debt issues at stake in France.

Germany is also living in a time of political uncertainty, compounded by a gloomy economic outlook (zero growth in Q4 2024 after 7 quarters of recession).
The 'Buba' (Federal Bank of Germany) has revised its growth forecasts for 2025 and 2026 sharply downwards.
GDP expectations for 2025 have been divided by more than 5 (from +1.1% in June to +0.2% in December), and for 2026, its estimate has been almost halved, from +1.4% to +0.8%.
Bunds show a spread of +5.6pts at 2.2460%, so the spread varies at the margin against OATs, at +77.8pts.
Italian BTPs do even worse, with +7pts at 3.384%, after +15pts the previous day: the week ends with a +20pt yield.

Yesterday, the ECB decided to lower its key rates for the fourth consecutive time this year: while this prospect is generally favorable for equity markets, some observers were disappointed by the tone of the ECB's speech and its lack of willingness to further support growth with a much more accommodating monetary policy.

Ann-Katrin Petersen, strategist at the BlackRock Investment Institute, notes that the central bank did not really reserve a 'Christmas present' for the markets, ruling out the implementation of more substantial support measures.

"Yet, despite encouraging signs of a recovery in private consumption, the eurozone is facing a number of obstacles to growth, ranging from rising US tariffs to growing geopolitical fragmentation and political uncertainty in several countries", explains the professional.

On the statistics front, US import prices rose by 0.1% in November compared with the previous month (stable excluding fuel), according to the Labor Department, while export prices stagnated (+0.1% excluding agricultural commodities).

On a rolling 12-month basis, US import and export prices rose by 1.3% (+2.3% excluding fuel) and 0.8% (+1.2% excluding agricultural products) respectively last month.

T-Bonds tightened by +5.7pts to 4.3800% (+23pts over the week), the '2-yr' posted +4.4pts to 4.23%, the '30-yr' +5pts to 4.397%.

In Europe, investors took note of several data this morning.
CVS industrial production remained stable in the eurozone and rose by 0.3% in the EU, according to Eurostat's first estimates.

In the eurozone, it rose by 1.7% for capital goods, remained stable for intermediate goods and fell by 1.9% for energy, by 1.8% for durable consumer goods and by 2.3% for non-durable consumer goods.

In September 2024, compared with August, industrial production was down by 1.5% in the eurozone and by 1.4% in the EU. Compared with the same month in 2023, it fell by 1.2% in the eurozone and 0.8% in the EU in October.

Over one year, consumer prices in France rose by 1.3% in November 2024, a slight acceleration after +1.2% in October, according to Insee, which confirms its provisional estimate for last month.

In Germany, the trade surplus fell in October, according to official data published on Friday, confirming the current difficulties of Europe's leading economy.

The trade surplus fell to 13.4 billion euros in seasonally and calendar-adjusted figures, after reaching 16.9 billion in September, announced Destatis, the Federal Statistical Office.

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