French Bond Yields Near 24-Year High as Protests Loom and CoreWeave Credit Stress Deepens

French government bond yields surged again on Tuesday, approaching the 5% mark and nearing their highest level in 24 years, as protest groups announced a new round of demonstrations planned for Saturday. The OAT-Bund spread, the closely watched gap between French and German yields, widened back to crisis levels, reviving calls for European Central Bank intervention under its PEPP program, which held approximately 1.27 trillion euros in bond holdings as of last week. The euro came under broad pressure as a result, with EUR/CHF and EUR/GBP both falling, while sterling and the Canadian dollar outperformed on expectations of further monetary tightening in Britain and Canada.

US Treasury Secretary Scott Bessent said he sees no spillover from France's bond market turmoil into the United States, describing recent US bond auctions as strong and characterizing the American bond market as performing well. Bessent attributed elevated US rates to an energy price shock and said he expects mortgage rates to come down, while stressing the need to grow out of debt and control spending. He also praised French President Macron's economic team as "first rate."

In a separate credit stress development, CoreWeave's dollar-denominated bonds fell sharply on Tuesday, with its October 2031 bonds dropping 2.3 cents to 79.46 cents on the dollar and its June 2030 bonds sliding 2.2 cents to 83.10 cents on the dollar. CoreWeave bond yields reached 15.5% as shares in the AI infrastructure company hit 17-month lows. The company borrowed tens of billions of dollars to build out AI infrastructure while interest rates climbed, and analysts flagged that its upcoming earnings report will be a key test of whether operating leverage can outpace mounting financing costs.