France's financial markets are riding a roller-coaster as the country grapples with one of its worst political crises in decades, and while sentiment is improving, the bumpy ride is not over. French Prime Minister Sebastien Lecornu has promised to suspend a landmark pension reform until after the 2027 election, sacrificing one of President Emmanuel Macron's achievements to ensure the government's survival.

Here's a look at where markets stand, and what comes next. BOND VIGILANTES IN HIDING?

The gap between 10-year French and German bond yields, the premium investors require to lend to France, is around 78 basis points, down from almost 90 bps last week. It could tighten towards 75 bps, said Citi's senior rate strategist Aman Bansal. It narrowed as investors focused on political stability

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