French OAT Yields at 2008 High on Rate-Hike Bets, Budget Risks

France’s 10-year OAT yield rose to 4.7%, its highest level since 2008, as elevated energy prices fuel concerns over renewed inflationary pressure and hawkish central-bank signals lift rate expectations. Money markets are now pricing in roughly 100 basis points of ECB rate hikes by late 2027, while investors in the US and UK have also increased bets on further tightening amid hawkish policymaker comments and resilient economic data. France remains under particular scrutiny ahead of the 2027 election, with a large primary deficit and heightened budget risks compounded by a fragmented parliament. Emergency energy-relief spending linked to the US-Iran war has further strained public finances, putting the deficit-reduction target out of reach. The budget deficit is now expected to widen to 5.4% of GDP this year, from 5.1% in 2025.

France’s 10-year OAT yield rose to a new 18-year high of 4.7%, as elevated oil prices and stronger economic data reinforced expectations of further monetary tightening by the European Central Bank. France remains under particular scrutiny as it heads towards the 2027 election with a substantial primary deficit and heightened budget risks amid a fragmented parliament. Brent crude climbed as heightened Middle East tensions clouded prospects for a diplomatic resolution to the US-Iran war. Meanwhile, data released Wednesday showed eurozone private-sector activity expanding at its fastest pace in nearly three and a half years, while French output grew for the first time in 10 months. Money markets are now pricing in at least one 25-basis-point ECB rate hike by year-end, with around a 40% probability of a second. In the US, investors have also increased bets on further Federal Reserve rate hikes following hawkish comments from policymakers and stronger-than-expected PMI data.

France’s 10-year OAT yield jumped to 4.6%, its highest level since July 2008, as oil prices rebounded amid continued uncertainty surrounding US-Iran talks and investors digested stronger-than-expected PMI data. Eurozone private-sector activity expanded in September at its fastest pace in nearly three and a half years, reinforcing expectations that the European Central Bank could raise interest rates further this year. ECB official Joachim Nagel said rising oil prices were becoming increasingly important for monetary policy, while Chief Economist Philip Lane warned that another energy-price surge could keep inflation elevated for longer. In the US, hawkish Fed comments and strong PMI data also lifted expectations for further rate hikes. Meanwhile, concerns over France’s public finances continued to weigh on sentiment, as the government struggles to rein in spending. The budget deficit is now expected to widen to 5.4% of GDP this year, up from 5.1% in 2025.