Overview of Important Overnight Developments on March 14

Eurozone government bond yields and US Treasury yields have fallen, as some investors believe that yields, which are close to multi-decade highs, are now attractive enough to re-enter the bond market. European investors are focusing on French government bonds, as their yields have surged recently due to budget disputes and the upcoming presidential election next year. Christoph Rieger, an analyst at Commerzbank, stated in a report: "The selling pressure on French government bonds appears to be easing, and the decoupling from US Treasury movements is encouraging." However, he noted that while the cancellation of this week's French bond auction has helped relieve some pressure, caution is still warranted. Germany's 10-year government bond yield fell by 6.1 basis points during the day to 3.435%; France's 10-year government bond yield fell by 9.8 basis points to 4.781%; and the US 10-year Treasury yield dropped by 2.3 basis points to 5.288%.

(1) Germany's OTC next-day baseload power price dropped by around 10%, falling to approximately 189 euros per megawatt-hour. (2) France's OTC next-day baseload power price fell by about 7%, dropping to around 186 euros per megawatt-hour. (3) The simultaneous decrease in electricity prices in both countries reflects a loosening of the short-term power supply and demand situation. (4) Germany's larger decline compared to France may be related to changes in wind power output or demand-side factors. (5) Going forward, attention should be paid to the impact of weather, renewable energy generation, and fuel costs on electricity prices.

(1) France's industrial production data for August showed a decline, with reduced electricity demand offsetting moderate growth in the manufacturing sector. (2) Specifically, industrial output in August fell by about 0.3% month-on-month, while July had reached its highest level since 2021. (3) Economists had widely expected a slight positive growth for August, but the actual result was clearly below expectations. (4) Manufacturing output grew about 0.3% month-on-month but was offset by a decrease in electricity production, resulting in overall weaker industrial performance. (5) This data reflects that the eurozone’s second-largest economy still faces significant challenges in driving growth. (6) France barely avoided recession in the first half of this year and now faces new economic headwinds. (7) There is growing market concern over whether the minority government can control the widening fiscal deficit. (8) The dual challenges of economic and fiscal pressures have increased sell-off stress in the bond market. (9) France’s relative borrowing costs have risen to their highest levels since the eurozone debt crisis compared to other countries. (10) Comments by Trump regarding tariffs have also raised market concerns and further dampened risk appetite. (11) Attention should be paid to the future direction of France’s fiscal policy and changes in the bond market climate to assess whether industrial and overall economic stability can be achieved.

President of the European Commission Ursula von der Leyen: We must address the structural issues that expose us to the volatility of foreign fossil fuel markets.