French OAT Yields Near 24-Year High as New Protests Loom, Spread Over Bunds Widens

French government bond yields climbed further on Tuesday after their biggest daily rise in nearly a month, with investors cautious as protest groups announced new demonstrations for Saturday. Weekend protests that led to riots across France added to the government's difficulties in reducing its large deficit. France's OAT yields rose 3 basis points to 4.96%, after reaching 4.9937% in early October, the highest since July 2002. The OAT-Bund spread widened 5.5 bps to 152.50 bps, approaching the 158.67 bps touched in early October, the widest since November 2011. The Italian spread also rose 4.5 bps to 113.51 bps. Citi strategist Jamie Searle said Tuesday's vote on the revenue side of the French budget bill takes on added importance as a near-term signal. ING's Benjamin Schroeder said the protests highlight that any government will struggle to implement reforms and savings against public resistance. Germany's 10-year Bund yield fell 2 bps to 3.43%, while the 2-year yield dropped 1.5 bps to 3.07%, as persistent energy price pressures kept investors from scaling back bets on further ECB rate hikes.