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Euro zone bond yields fell on Monday as investors shrugged off a largely-expected French presidential election result and focused on growth risks amid fears coronavirus restrictions in China would extend to Beijing.

Incumbent Emmanuel Macron comfortably defeated far-right rival Marine Le Pen in France’s second-round presidential election on Sunday. France’s 10-year yield was down around 9 basis points to 1.34% by 0723 GMT, in line with moves on other 10-year bonds in the bloc.

“Macron was very close to fully priced in anyway. The market was pricing 90 to 95 percent of that happening,” said Peter McCallum, rates strategist at Mizuho.

French debt had already outperformed last week as Macron extended his lead in the polls and investors priced out the risk that Le Pen may have won.

The closely watched risk premium of French bonds over Germany’s widened slightly on Monday after touching three-week lows last week.

Across the broader euro zone bond market focus turned to growth risks as a rise in coronavirus cases in Beijing fuelled concerns that China’s capital may be on the verge of joining Shanghai in lockdowns.

Beijing on Monday ordered residents in one area of a COVID-affected district to not leave the area and their local compounds for non-essential reasons. Germany’s 10-year yield, the benchmark for the bloc, was down 9 bps to 0.87%.

German 2-year debt yields at 8-year high as bonds whacked again

“We’ve got this potential Chinese lockdown which is a much bigger market focus now,” McCallum at Mizuho said.

“The concern is that (restrictions) spread much more widely and you get more of a demand slowdown and if China’s locked down, that makes supply chain normalisation that much more difficult and extends this stagflation environment we are in,” he added.

Focus was also on the European Central Bank, where policymakers are keen to end their bond purchase scheme at the earliest possible moment and raise interest rates as soon as July but no later than September, nine sources familiar with the ECB’s thinking told Reuters.

Nearly all of the sources said that they see at least two rate hikes this year, but some argued that a third is also possible, although highly dependent on how markets digest the move.

That followed comments by president Christine Lagarde on Friday, who saw a “strong likelihood” of raising rates before the end of the year.

Euro zone money markets had already moved to price in over 85 basis points of hikes by year-end on Friday.

On Monday the bets only eased slightly, to around 82 bps by year-end.

Elsewhere, S&P Global upgraded Greece’s credit rating to BB+ late on Friday – one notch below investment-grade territory – from BB previously, citing improved policy effectiveness.

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