US 10YR FUTURE TECHS: (Z5) Remains Above The 50-Day EMA

• Fitch may downgrade France’s sovereign rating to A+ on Friday after hours, following Bayrou’s unsurprising ousting as Prime Minister after yesterday’s no confidence vote. However, given the political risk premium that has built up in OATs in recent weeks, we suspect markets have mostly priced in this outcome.
• President Macron’s office has said a new PM will be appointed in the coming days. See colour on the current front runners here .
• On March 14, Fitch affirmed France’s rating at AA- (Outlook Negative). In its report, Fitch noted that a downgrade would be possible if there is a “failure to implement a credible medium-term fiscal consolidation plan, for example, due to political opposition or social pressures” and/or if there is “materially lower economic growth prospects and weakened competitiveness.”
• Given recent political (and economic) developments, it seems the conditions for a downgrade have been met. If realised, Fitch would be the first major issuer to downgrade France from an “AA- equivalent” rating.
• S&P also maintains a Negative Outlook on France (rating AA-), but a review isn’t due until November 28. Moody’s holds France on a Stable Outlook (rating Aa3), with a review due on October 24.
• Other ratings action of interest on Friday include Fitch on Portugal (current rating: A-, Outlook Positive) and S&P on Spain (current rating A, Outlook Stable).
• Portugal was upgraded by S&P on Aug 29, so a similar outcome from Fitch is possible on Friday. OTs already screen a little rich on a simple ratings vs 10-year yield curve, so this may also (at least partially) be in the price. 

Source: Bloomberg

• SNB President Schlegel is scheduled to appear at a BIS panel on "future-proofing central banks" in Basel today (link here: https://www.bis.org/events/bis_innovation_summit_2025/agenda.pdf). The event is officially scheduled on the SNB calendar but to our knowledge there will be no speech text release.
• In an interview yesterday (text, in German), Schlegel said "We are aware that negative interest rates can have undesirable side effects, for example for savers and pension funds. The hurdle to reintroducing them is high", broadly repeating his rhetoric from the June policy meeting.
• Schlegel is also scheduled to appear tomorrow, where he will hold prepared remarks on "communication – an important element in fulfilling the SNB’s mandate" then, with a scheduled text release for 12:45 BST / 13:45 CEST. This appearance would seem to be the most natural fit to potentially provide any new signals on monetary policy ahead of the SNB meeting on September 25.
• Our base case would be that Schlegel's rhetoric implicitly remains rather sceptical towards a cut into negative rates at the September meeting taking into account inflation has printed the third consecutive time within the SNB's target range in August. Any dovish tilt here could be considered a material surprise given market pricing for a mere 6% implied odds of a September cut.