Finance
Morning Bid: Bonne chance, Bayrou
Published by Global Banking & Finance Review®
Posted on January 14, 2025
3 min readLast updated: January 27, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on January 14, 2025
3 min readLast updated: January 27, 2026
French PM Bayrou's pension reform speech may impact markets. Investors worry about changes to pension age and French debt risk.
A look at the day ahead in European and global markets from Vidya Ranganathan
France's new government faces a big test today. Prime Minister Francois Bayrou is expected to lay out in a speech the contours of a deal to water down pension reforms in return for support from the left on passing a budget.
Bayrou's government, which was formed last month after the collapse of his predecessor's administration, has been trying to win assurances from some opposition parties - and the Socialists in particular - that they will not vote against its 2025 budget.
Analysts expect he will win the vote. Bayrou's entourage declined to reveal details of the speech but told Reuters the content would take into account his talks with party leaders and unions.
Markets are nonetheless nervous, fearing Bayrou will undo parts of the pension reform that involve raising the minimum age for a full pension, which could save billions of euros for the strapped government.
The risk premium on French debt, measured by the yield gap between French and German 10-year yields, is trading near its highest levels in more than 12 years as investors worry about political instability and a burgeoning public deficit.
Markets will also be trading with one eye on U.S. producer prices and items that influence the Fed's PCE deflator metric due later. That's ahead of the more important consumer price index on Wednesday, as expectations rage for inflation to pick up when President-elect Donald Trump unveils policies on tariffs, migration and taxes, as soon as at his inauguration next week.
Investor nerves have been running high since Friday's unambiguously strong U.S. payrolls report sent up yields and decreased the market odds of Federal Reserve interest rate cuts. Markets are pricing just 29 basis points of cuts from the Fed this year.
Ten-year Treasury yields hit 14-month highs, driving a spike in the dollar and a wave of selling in technology stocks, which spread to Asia in early trade. Japan's Nikkei slid after a holiday break and with U.S. inflation data on investors' minds.
The U.S. dollar index hit its highest in more than two yearson Monday, before retreating a little on a Bloomberg News reportthat the incoming Trump administration was discussing agradual, rather than sudden, tariff plan.
Key developments that could influence markets on Tuesday:
Data: U.S. PPI
Speakers: ECB's Robert Holzmann, Bank of England Deputy Governor Sarah Breeden, Riksbank Deputy Governor Aino Bunge, Kansas City Fed President Jeffrey Schmid
Earnings: Games Workshop Group PLC
Debt auctions: Germany reopening of 5-year, UK 30-year.
(By Vidya Ranganathan; Editing by Edmund Klamann)
The article discusses French PM Francois Bayrou's approach to pension reform and its impact on European and global markets.
Markets are concerned about potential changes to the pension age and the high risk premium on French debt.
U.S. inflation data and Fed interest rate expectations are influencing global market reactions.
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