European bond yields rise amidst French political turmoil

LONDON, Oct 7 (Reuters) – Euro zone bond yields rose on Tuesday, a day after French Prime Minister Sébastien Lecornu unexpectedly resigned, deepening a political crisis in Europe's second-biggest economy. French President Emmanuel Macron on Monday tasked his outgoing prime minister, who quit earlier in the day, to hold last-ditch talks with other political parties to try to chart a path out of the crisis. Lecornu tendered his government's resignation only hours after announcing his cabinet line-up, making it the shortest-lived administration in modern French history. The German 10-year bond yield, the benchmark for the euro zone bloc, rose 1.4 basis points to 2.73%. The French 10-year yield was up 2.7 bps at 3.599%. This left the yield gap between safe-haven Bunds and 10-year French government bonds – a market gauge of the risk premium investors demand to hold French debt – at 83 bps. The spread on Monday hit 87.96 bps, its highest since January 13. Meanwhile, Japanese government bond yields retreated from record highs after a closely watched sale of 30-year debt passed smoothly, despite concerns that the country's likely next prime minister will loosen fiscal restraints. Following the surge in Japan's 30-year borrowing costs, ultra-long bonds across Europe also came under pressure. The 30-year German bond yield rose 2.4 bps at 3.32%. The French 30-year yield was up 3.2 bps at 4.43%. Italy's 30-year yield was up 3.7 bps at 4.51%. On the data front, German industrial orders fell for a fourth straight month in August, dragged lower mainly by a weak car industry and a decline in overseas demand, the federal statistics office said on Tuesday. (Reporting by Joice Alves; Editing by Sharon Singleton)

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