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10.30.2026

OATs: Still trop tôt

We remain underweight French government bonds. The transition towards greater domestic ownership of French debt will happen in a context of much higher monetary policy rates, the lack of a massive, price-insensitive buyer (the ECB) and a much higher deficit than in the aftermath of the eurozone debt crisis episode.

We remain underweight French government bonds. 

Although French domestic investors are underinvested in domestic bonds and have sufficient balance-sheet capacity to absorb a meaningful reduction in foreign holdings and/or further selloffs, they might not be willing to buy large volumes of OATs at current prices and at the current political juncture, given the prospect of further volatility ahead stemming from political and fiscal risks. 

Moreover, barring meaningful policymaker action, transitioning towards greater domestic ownership of French debt will have to happen in a context of much higher monetary policy rates, the lack of a massive, price-insensitive buyer (the ECB) and a much higher deficit (and therefore net supply) than in the aftermath of the eurozone debt crisis episode (for peripheral countries). 

Against this backdrop, we expect French govies to remain vulnerable to episodes of volatility in the next few months.

Chiara Cremonesi 
Senior Rates Strategist 

Mattia Banin 
Junior Macro Analyst 


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