Harry Robertson

French borrowing costs effectively matched those of Greece on Thursday for the first time, as Michel Barnier's government teetered on the brink of collapse, underlining a dramatic shift in how lenders view the creditworthiness of euro zone members.

The premium investors demand to hold French debt rose to its highest level since 2012 on Wednesday in a sign of worries over the country's finances, while benchmark German yields fell along with those in the United States.

Investors will have to buy a record amount of euro zone government bonds for a third straight year in 2025 and without the ECB in the market, potentially adding pressure on borrowing costs when political and economic uncertainty is high.

The pound held steady on Monday after falling to a six-month low the previous week as the dollar surged on the back of Donald Trump's victory in the U.S. presidential election.

Hedge funds are becoming increasingly active in Europe's bond markets and, so far, they have brought with them more benefits than risks, Italy's debt chief Davide Iacovoni said on Wednesday.

Euro zone growth may be weaker than earlier thought and fresh barriers to global trade could lead to a vicious circle of trade war with dire consequences for the economy, European Central Bank Vice President Luis de Guindos said on Wednesday.

The world's second-biggest asset manager Vanguard said on Friday it had bought UK government bonds in the wake of the new Labour government's budget, taking advantage of a sharp fall in prices.

Gauges of expected volatility in currencies jumped on Wednesday as investors braced for the U.S. presidential election, which could result in big changes to economic policy and swings in the dollar.

Britain's finance minister Rachel Reeves will deliver the first budget of the new Labour government on Wednesday, two years after then-Prime Minister Liz Truss' tax-cutting plans sparked a crisis in the bond market.

Yields on British government bonds climbed on Thursday after a newspaper said finance minister Rachel Reeves was set to give herself a lot more room for borrowing in next week's budget, which could slow the Bank of England's interest rate cuts.