Interest rates peak in France and the UK. Down the pound

The interest rate on French 30-year debt rose above 4.50% today amid growing uncertainty over the political and budgetary situation in France. The confidence vote on 8 September in the National Assembly is expected.

By mid-morning this rate, considered the barometer of long-term investor confidence, reached 4.50%, up from 4.45% at the previous day's close. The last time it had exceeded this threshold during the session was in November 2011, at the height of the Eurozone sovereign debt crisis.

High tension also hung over British debt, with the yield on 30-year bonds at their highest since 1998 amid fears for London's public accounts and the global race to raise the cost of financing debt. The yield on the 30-year gilt soared to 5.7 per cent, up 6 basis points, marking 27-year highs and at levels that exceed those of any eurozone country: Britain is paying, in addition to budget strains, for its large current account deficit at a time of serious trade tensions over tariffs. The 10-year gilt, at 4.82% up six basis points, remains just below the 16-year high set in January at 4.93%. Amid nervousness among traders over the reshuffle in the Starmer executive and pressure on Chancellor of the Exchequer Rachel Reeves, sterling also suffered, down 1.2% against the dollar and 0.6% against the euro.

The start of the session slightly increased for the spread between the BTp and Bund. The yield differential between the benchmark ten-year BTp and the German Bund of the same duration is indicated at 90 basis points, one more than yesterday's close. The yield on the benchmark ten-year BTp rose to 3.70 per cent, up from 3.64 per cent on the previous day. In view of the confidence vote in France, eyes are also on the spread between Italy and France in relation to the Bund on the ten-year maturity indicated at 10 basis points, with the OaT yield at 3.57%, up on yesterday's close.