European bond market receives temporary relief as political signals from Germany and France provide a buffer

⑴ The yield on France's 10-year government bonds approached the 5% mark late last Friday, but market sentiment has calmed at the start of this week.⑵ Both Germany and France have seen politically significant developments, viewed by the market as "circuit breaker"-like buffer factors.⑶ In Germany, a party strategy document reveals that its European policy experts have agreed to adjust their approach to EU and monetary policy, no longer calling for an exit from the euro system or departure from the EU.⑷ The document advocates transforming the EU into a federation of sovereign states, focusing on the internal market, protection of external borders, and the coordination of security matters, while returning political power to nation states.⑸ It also proposes significantly limiting the scope of operations for the European Central Bank, including ending indirect government financing, settling Target balances, and establishing a bankruptcy mechanism for member states.⑹ In France, the opposition leader has put forward a plan to consolidate public finances, aiming for a partial return to Maastricht standards by keeping annual new borrowing below 3% of GDP.⑺ The plan calls for savings of about €140 billion through strict expenditure cuts by 2032, achieving a primary budget balance during the term, and proposes enshrining a debt brake in the constitution through a referendum.⑻ She also advocates immediately reducing France's net contribution to the European Commission back to early 21st-century levels—roughly €5 billion.⑼ Some analysts believe the market fears uncertainty most; clear policy prospects help restore confidence in the bond market.⑽ Overall, fiscal discipline and constraints on EU expansion have provided temporary relief to Europe’s bond market.⑾ Looking ahead: attention shifts to the progress of the French elections, implementation of relevant German policies, and the direction of EU long-term budget negotiations.