France is facing nationwide unrest, with more than 500,000 protesters in the streets, and it’s showing up in their bond market. The French 10-year bond (the OAT, France’s version of our 10-year Treasury) jumped 10 basis points.

Over the past two weeks, as France came into focus, its yields moved sharply higher. Yields around the world followed. When one major government bond suddenly pays more, other bonds have to compete for the same investors.

Now cooler heads are prevailing. Money is moving to safety in U.S. Treasuries and German bonds. That buying is pushing yields down, which is helping mortgage rates this morning.

Every little bit helps, and the trend is moving in the right direction. Remember: watch the dog, not the tail. Focus on the overall trend, not the daily wiggles.

We expect rates to keep improving. The gains may be small, but it’s a good sign.

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