Rates Weekly: France, light at the end of the tunnel?

EUR rates:Recap of the week & insights of the week: The lack of major macroeconomic data in the eurozone is leading to range trading, with the 10Y Bund yield continuing to trade close to 2.70%. On the EUR swap curve, 10s30s flattened with Dutch pension funds once again in the spotlight. The most significant move has been mainly on the OAT as the risk of immediate snap elections has been reducing. Should a new government be appointed swiftly, withstand the anticipated vote of no confidence, and effectively initiate the budget debate, we can expect a period of short-term stability in the spread. In this case the 3Y OAT appears attractive for carry rolldown perspective. As we continue to see the risk of snap elections, we maintain our OAT-Bund spread target around 85bp by year-end, but this risk is trending downwards.Tactical view:  We maintain a short duration bias with moderate conviction.  EGBs supply is expected to rise next week to €36bn (€25.9mln DV01) compared to this week at €20.4bn. We continue to favor the belly for carry. We do not expect significant steepening into year-end. We keep our short OLO vs. BTP convergence trade ahead of Moody’s review on October 10US rates:As US rates remained generally range-bound this week without many catalysts, we have updated our long-term interest rate forecasts for US Treasuries. While our expectations for the Fed remain unchanged, we have reconsidered the reaction function of the US rate market and have shifted our yield forecasts bearishly though 2026.