French Prime Minister’s Resignation Fuels Global Bond Sell-Off

Longer-dated yields edge higher on European fiscal concerns. UST yields traded within a 4 bp range today as markets remained quiet amid the US government shutdown. The long-end of the curve saw relatively elevated volatility after France’s new Prime Minister, Sebastien Lecornu, announced his resignation. This comes as the politically fragmented French parliament refuses to compromise, heightening Lecornu’s lack of confidence in getting a new budget approved. France’s 30-year government bond yield momentarily hit a 1-month high of 4.44%, and the move largely fueled a 3-4 bp climb in 10, 20, and 30-year UST yields. The 10-year yield and 30-year yield closed at 4.15% and 4.75%, respectively. Meanwhile, equities rallied today on strength in AI chipmakers following a deal between Advanced Micro Devices and OpenAI, which sent AMD climbing 23.71% and the NASDAQ up 0.71%.

Trump announces tariffs on medium and heavy-duty trucks. President Trump said Monday that a 25% tariff on medium and heavy-duty truck imports will go into effect November 1st. The tariffs, on vehicles weighing 10,000lbs or more, and their associated parts, were originally set to begin October 1st but were delayed as the White House heard appeals from industry groups. While proponents of the tariffs say they will help protect a critical industry, those opposed say the sector already faces economic pressure from steel and aluminum tariffs as well as tightening environmental regulations. In 2024 the US imported over 250k medium and heavy-duty trucks, an inflow worth more than $20 billion; the new tariffs are likely to raise prices on shipping, construction, and municipal service vehicles.

Key economic adviser says October is too soon for a BOJ rate hike. On Saturday, Sanae Takaichi won the incumbent party’s leadership race and is expected to become Japan’s next prime minister following a parliamentary vote in mid-October. The Bank of Japan’s next policy meeting is scheduled shortly after, on October 30. In an interview with Bloomberg, Takaichi’s top economic adviser, Etsuro Honda said, “A rate hike in October is probably difficult in my view. It depends on the macroeconomic environment, but I don’t see a problem if it’s raised by 25 basis points in December.” Honda noted that Takaichi wants the BOJ to move cautiously with rate hikes, though the likely PM has not specified a timeline. Honda also emphasized Takaichi’s intention to establish a strong partnership with President Trump, a goal influenced in part by the close relationship Takaichi’s mentor, former Prime Minister Shinzo Abe, has with the US leader.