5% Yields: Paris Pays for Its Budget, Wall Street Flees Tech

On Wednesday, shortly before 11:30 a.m., the 10-year OAT yield rose above 5% for the first time since 2002. The next day, the U.S. 10-year yield fell back below that threshold as tech stocks suffered a brutal sell-off. The same round number reflects two opposing mechanisms. Before placing a single order, you need to understand which one is at work.

In brief

• 10-year OAT: above 5% on Wednesday, October 21, for the first time since 2002, as the 2027 budget remained deadlocked in Parliament.
• Thursday, October 22: the Nasdaq fell 2.6% and semiconductor stocks dropped 6.7%. The U.S. 10-year yield fell 18.5 basis points to 4.9612%.
• Oil and gold: Brent reached $113.17 on Thursday, its highest level since May 4. Gold fell below $4,000 an ounce in Asia on Friday.

Paris: 5%, the price of a budget no one can agree on

The threshold is symbolic; the move is not. According to CNBC, the OAT yield briefly moved above 5% on Wednesday morning. It later fell back toward 4.9794%, still up by around 6 basis points on the session.

The backdrop is familiar. Sébastien Lecornu’s government is negotiating the 2027 budget with a divided National Assembly. It is targeting €54 billion in savings. France remains subject to the European excessive-deficit procedure. And violent protests shook the country the previous weekend.

Pay particular attention to the nature of this increase. French yields are not rising because the economy is overheating. Nor are they rising because the ECB is about to take a tougher stance: the economic calendar expects its refinancing rate to remain unchanged at 2.65% on October 29. Yields are rising because investors are demanding a premium to hold French debt. This is a political risk premium.

That premium does not disappear after a good economic indicator. It follows votes, motions and street protests. And a yield that rises out of fear does not attract capital—it drives it away. The euro and French stocks therefore have nothing to gain from a 5% OAT yield, even if the old reflex that “higher rates mean a stronger currency” suggests otherwise.

Wall Street: tech plunges as Treasuries become a haven

On Thursday, the U.S. market moved at two speeds. The Nasdaq fell 2.60% and the more concentrated Nasdaq 100 dropped 2.90%. The Dow closed virtually unchanged, reports investingLive. For the Nasdaq, it was the worst session since June.

The trigger came from earnings and spending plans at the tech giants. Meta’s spending plans revived an uncomfortable question: will the billions invested in AI ever generate a return? The Philadelphia Semiconductor Index shed 6.7%, its biggest one-day drop since June.

Money leaving tech flowed into U.S. bonds:

• 2-year: 4.6524%, down 17.1 basis points;
• 5-year: 4.7784%, down 19.2 basis points;
• 10-year: 4.9612%, down 18.5 basis points.

The 10-year yield thus returned to its lowest level in nearly a month, according to CNBC. Here, the decline in yields reflects a flight to quality and doubts about growth. By the end of the day, futures were pricing in a 22% probability that the Fed would not raise rates again by year-end. Another hike remained the majority scenario, but the possibility of a pause was gaining ground.

The labor market, meanwhile, is holding up. On the same day, weekly jobless claims came in at 194,000, versus expectations of 200,000 and 199,000 the previous week.

In currencies, the traditional havens worked. The dollar fell 0.82% against the yen to 156.83 and 0.46% against the Swiss franc to 0.8206.

A 5% yield says nothing by itself. First ask yourself who is selling the bond, and why.

Oil and gold: havens are no longer moving in lockstep

While tech was falling, oil was surging. December-delivery Brent closed Thursday at $113.17, its highest level since May 4, according to Financial News. WTI rose 2.4% to $99.47. The spark came from a New York Times report: Washington and Israel were said to be preparing new strikes against Iran after the November 3 midterm elections.

On the ground, a drone strike on Saudi Arabia’s Shaybah oil field killed two people without disrupting production. Another detail matters: exports through the Strait of Hormuz are recovering toward pre-conflict levels. The market is therefore pricing in risk, not yet a shortage.

Gold, meanwhile, did not play its usual role. Despite lower yields and tensions in the Middle East, gold fell below $4,000 an ounce on Friday, the first time since July. Bitcoin followed the selling pressure. On Friday, the contagion spread to Asia: the KOSDAQ fell 3.5%, the KOSPI 2.2% and the Nikkei 1.4%.

In Japan, core inflation excluding fresh food reached 2.1% in September, its highest level of the year, up from 1.7% in August. Excluding fresh food and energy, it rose to 2.4%. That could reinforce expectations of another Bank of Japan rate hike, with the central bank meeting on October 30.

Five central banks in three days

The coming days will decide which of these narratives prevails. Here are the events on the economic calendar, in Paris time.

The U.K. budget is also due on October 28 at 1:30 p.m. No forecast has been published.

• A Fed pause is taking shape. If the PMIs and PCE confirm a slowdown, the U.S. 10-year yield could remain below 5% and the yen could maintain the upper hand.
• The oil shock takes over again. If Brent were to settle above $113, inflation fears would return. Stocks and bonds could then fall together. This is the most uncomfortable scenario for a portfolio.
• Paris remains deadlocked. Without a budget agreement, the OAT could remain above 5% even if Treasury yields ease. A dovish Fed would not change that.

Typical mistakes during this kind of session

Trading the round number. A 5% 10-year yield in Paris and a 5% yield in New York do not tell the same story. One measures distrust; the other reflects monetary policy. Before acting, identify the cause.

Believing that all havens rise together. On Thursday, Treasuries, the yen and the franc provided protection. Gold and bitcoin did not. A “haven” must be assessed one session at a time.

Stacking the same idea. Buying the Nasdaq, buying bitcoin and selling the yen: three positions on your platform, but a single bet on risk appetite. On Thursday, all three lost value at the same time.

Chasing a geopolitical headline. Announcements keep coming and contradicting one another. On Thursday, for example, the State Department denied ordering the evacuation of its citizens from the Gulf: the departure order applied only to Saudi Arabia. A tight stop placed on a breaking-news headline will often be triggered by the next denial.

Keeping your usual position size. When the range doubles, the risk also doubles if the position size stays the same. This is the costliest mistake, and the easiest one to fix.

Set these sessions aside. An automated trading journal such as Edgyx can then help you compare your results during stress sessions with those from a normal session. If the gap is significant, you have your rule: reduce position size as soon as volatility accelerates.

Key takeaways

• The OAT rose above 5% on Wednesday for the first time since 2002. This is a political risk premium linked to the 2027 budget, not a growth signal.
• On Thursday, the Nasdaq lost 2.6% and the U.S. 10-year yield fell 18.5 basis points. Here, yields fell because money was seeking shelter.
• Brent at $113.17 and gold below $4,000 show that havens are no longer reacting as one.
• Fed on October 28, ECB on October 29, Bank of Japan on October 30: ahead of these events, position size matters more than direction.
• Before every trade, check that your open positions are not all expressing the same bet.