Macro Bites – French Bond Yields Cross 5% as Budget Pressure Mounts

In Tuesday’s referendum, voters in Canada’s oil-rich Alberta province overwhelmingly backed remaining in Canada, delivering a boost to Prime Minister Carney's push for national unity as President Trump’s trade war and annexation threats rally Canadians around the country.  Elections Alberta reports 75% of voters supported remaining in Canada, while 25% backed beginning a process toward separation.

The yield on France’s 10-year benchmark government bond (OAT) soared an additional 7bps on Wednesday crossing the 5% threshold for the first time since ‘02, driven by political instability, a divided parliament, and intense pressure over the ‘27 budget and public spending cuts. The OAT yield spread over German bunds rose to 159.4bps (widest in 15 years).  Separately, France will deploy military troops this weekend to reinforce police against the continued rioting. "The deployment next Saturday will be massive," Prime Minister Sebastien Lecornu said, adding that the immediate priority was to restore order.

The biggest Chinese nickel producers in Indonesia will cut production at some of their plants in a bid to support the battery metal’s flagging prices.  The coordinated action was agreed at a meeting of senior executives from Tsingshan Holding Group, GEM Co., Lygend Resources & Technology
Co. and Zhejiang Huayou Cobalt on Tuesday.  The refineries will reduce output of mixed hydroxide
precipitate (a battery ingredient made at high-pressure acid leaching plants) by 50% and production of nickel pig iron (used to make stainless steel) will be cut by 20%.  In response, LME nickel futures rose for a fourth straight day as much as 2.9% to exceed $16k/t, building on gains since hitting a nine-month low last Thursday.

AI watch:  Shares of Australia’s NextDC plunged 42% on Wednesday after the data center operator slashed its annual earnings forecast, citing power supply delays at its Melbourne facility amid local community and stakeholder opposition. Separately, despite reporting record new orders and increasing full-year ’26 guidance, Swiss engineering giant ABB fell 6% due to market concerns about ABB’s AI exposure as a major supplier to data centers.  Finally, Reuters comments Nvidia is functioning as the central bank of AI, pledging massive support to keep the buildout going.