The essentials in one coffee
- France: the OAT‑Bund spread rises from 109 to 141 bp over the week, with an intraday peak of 159 bp on Friday; the 2027 budget sets a framework without convincing.
- Fed: only 29,000 jobs created in September; the probability of a hike on 28 October falls to around 20%, from more than 70% on Tuesday.
- Energy: the G7 releases up to 100 million barrels of diesel and crude; Brent falls 1.4% over the week.
- Credit: the risk premium on CCC bonds exceeds 1,000 bp, a first since 2023; the iTraxx Europe rises 6% to 64.6 bp.
FRANCE & SOVEREIGN DEBT
OAT‑Bund spread at its widest since 2012, the market holds
- Spread and curve: 141 bp at Friday's close against 109 bp a week earlier; OAT 10Y at 4.87%, 30Y at 5.43%; the French 5-year CDS rises from 58 to 86 bp.
- 2027 budget: a €54bn effort to bring the deficit from 5.4% to 5% of GDP; Morgan Stanley keeps 5.4% for 2027, Candriam speaks rather of 6%, and the interest burden would reach around €91bn.
- Contagion: on Thursday, the 2-year BTP‑Bund spread doubles to 55 bp and the OAT yields around 40 bp more than Greek debt; on Friday, the French 30-year recovers 11.8 bp after long-dated auctions judged solid.
LUSIGNAN'S VIEW — Distrust has a price, but it also rewards those who carry this risk: an OAT 10Y at 4.87% and a 30Y at 5.43% are entry points that had not existed for more than fifteen years. Selectivity and close monitoring of the political calendar.
RATES & CENTRAL BANKS
US jobs push the Fed back, long-term rates do not give way
- US employment: 29,000 jobs created in September against 90,000 expected, unemployment at 4.2%; core PCE inflation for August rises 0.2%, less than expected, but the prices component of the manufacturing ISM climbs to 77.9.
- Long-term rates: the US 10Y touched 5.33% and the 30Y 5.67%, the highest since 2002; the UK 30-year exceeds 6% for the first time since 1998.
- Euro area: inflation at 3.8% in September against 3.2% in August (2.5% excluding energy and food); the market trims its bets on ECB hikes over twelve months, from 87 to 73 bp.
LUSIGNAN'S VIEW — The short end is starting to price in the end of the cycle, a move that often precedes stabilisation at the long end. Until then, current yields offer conditions rarely combined for protected savings.
ENERGY & GEOPOLITICS
The G7 opens its diesel reserves, the Iranian risk remains
- Strategic reserves: the G7 releases up to 100 million barrels of diesel and crude; Brent drops below $100 on Friday before recovering late in the session.
- Diesel: the premium of European diesel over Brent reached a record of around $100 a barrel on Monday (Morgan Stanley); deliveries of refined products from the Gulf are only at 50% of normal.
- Iran: Iranian exports have fallen to zero under the US blockade; the barrel recovered on Friday on reports of renewed hostilities between Saudi Arabia and the Houthis.
LUSIGNAN'S VIEW — A lasting easing in diesel would be the best ally of European bonds, by reducing pressure on the ECB. Caution, however: G7 reserves are close to their lowest in decades and the shortage of refining capacity remains structural.
EQUITIES & CREDIT
AI carries Wall Street, Europe and high yield drop
- Indices: S&P 500 −0.3%, Nasdaq 100 +0.7%; Euro Stoxx 50 −1.0%, CAC 40 −2.2%, the only major European index down since January.
- Europe: the Stoxx 600 touches its lowest since June on Thursday, with 12% of its stocks in oversold territory; banks lose 3.7% on Thursday and post their worst week since March.
- Credit: the CCC spread exceeds 1,000 bp and the gap with Bs reaches 700 bp, the widest since 2020; rising rates and rising credit risk now go together.
LUSIGNAN'S VIEW — Investors are lightening up and becoming more selective without abandoning their themes. European credit is becoming rewarding again, with rates and spreads rising together: a lead to study case by case. In equities, Europe remains more responsive to an easing in diesel or in the French spread.
OTHER NEWS
In brief
- Earnings: Micron guides for $60bn to $63bn of revenue for the current quarter; Accenture jumps 16% on Thursday, its biggest intraday gain ever; Nike announces a restructuring and hits its lowest since 2013.
- AI: Anthropic's prospectus reveals $518bn of infrastructure and compute commitments, for an IPO targeted at between $1,800bn and $2,000bn; Amazon signs a 690 MW nuclear power contract with Constellation.
- China: the official manufacturing PMI returns to 50.1; Beijing steps up its targeted support, but the recovery remains uneven.
This is not investment advice.
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