France's 10-year government bond yield fell back below 5% after Moody's Ratings decided to keep the country's credit rating unchanged.
The 10-year yield dropped 0.12 percentage points to 4.91% on the 26th, the Financial Times reported. The yield had climbed above 5% last week for the first time since 2002 as prolonged mass protests over surging living costs and deteriorating school conditions weighed on the market.
The Financial Times said the move followed Moody's decision on the 23rd, released after the market close, to maintain France's sovereign rating at Aa3 with a negative outlook. Many investors in the market had expected a downgrade. Moody's said its decision assumed that a 2027 deficit-reduction budget would be adopted and that funding costs and social tensions would ease going forward.
The largely peaceful conclusion of large-scale protests held over the weekend also helped. After a demonstration on the 17th drew 550,000 people and ended in rioting and looting, the French government deployed 70,000 police officers for the latest protest, 20% more than the previous time. It also introduced tougher measures allowing only officially recognized unions to organize demonstrations and restricting protests in some cities. "The fact that the weekend protests ended at a manageable level increased the market's sense of relief," said Alex Kutni, head of international rates at Vanguard.
The decline in French yields benefited other eurozone countries as well. Italy's 10-year yield, which had come under selling pressure recently, fell 0.1 percentage point to below 4.5%. The spread between German bonds, regarded as a safe-haven asset, and French bonds narrowed to about 1.5 percentage points. The spread had earlier exceeded 1.7 percentage points for the first time since 2011 as the protests intensified. The Financial Times said a decline in international oil prices early in the session was also reflected in the eurozone bond market. Oil later recovered its losses in early New York trading, with Brent crude futures up 0.3% at above $117 a barrel.
France Pledges 4 Billion Euros to Angry Students
The French government has drawn up a plan to overhaul learning conditions in an effort to calm nationwide protests.
The government plans to expand university enrollment and improve high school facilities, Bloomberg reported. The plan was announced after Prime Minister Sébastien Lecornu met with representatives of student groups.
Some 4 billion euros (5.921 trillion won) will be spent on renovating high school facilities. Protests by high school students over overcrowded classrooms and aging school buildings have fueled the mass demonstrations in France this October.
The government is also pushing to overhaul Parcoursup, the university admissions system. Democrata reported that the government announced Parcoursup would undergo "significant changes" in 2027 before being replaced by a new system in 2028. Parcoursup assigns applicants to universities but has been criticized as opaque, unfair and overly complex. The government will also seek to add 15,000 university places and cap class sizes in the second year of secondary education at 28 students.
Education Minister Édouard Geffray said 1 billion euros of the 5 billion euros would be used to improve universities by 2031, with the remaining 4 billion euros raised in the form of loans to educational institutions.
Student groups welcomed the government's plan but said the protests should continue, arguing that the measures remain under review and are not yet final. President Emmanuel Macron said on the same day that "next Saturday will also be a dangerous Saturday." Major French labor unions are also planning a general strike on the 5th of next month.