French Bond Yields at 2002 High

France’s 10-year OAT yield climbed to 4.92%, its highest level since July 2002, as a broader global bond selloff intensified concerns over the country’s fiscal and political outlook. The yield spread over equivalent German Bunds widened to 152 basis points, the largest premium since 2011, reflecting growing investor concern about France’s rising debt burden and limited progress on deficit reduction. The government aims to bring the budget deficit down to 5%, but deteriorating public finances have made that target increasingly difficult to achieve. Political tensions remain elevated, with student protests spreading across France and up to 500 schools facing partial or full closures. More than 5,000 people have been arrested since the protests began, adding to pressure on the government. Prime Minister Sébastien Lecornu pledged measures to address concerns over education and public services. Elsewhere, Spanish PM Sánchez called a snap election after Congress rejected housing measures.

France’s 10-year OAT yield briefly climbed above 5%, its highest level since July 2002, as concerns over the country’s fiscal outlook and political uncertainty intensified. Global government bonds have faced renewed pressure amid elevated energy prices, rising inflation and shifting interest-rate expectations, while French debt has been hit particularly hard by concerns over the government’s ability to rein in spending ahead of the 2027 presidential election. Paris presented its 2027 budget bill on Thursday, proposing unpopular spending cuts aimed at reducing the budget deficit to 5% of GDP next year. The plan has already come under scrutiny from the country’s fiscal watchdog, which warned that its economic assumptions were “optimistic.” Meanwhile, the spread between French and German 10-year yields widened above 150 bps, the highest since late 2011. Agence France Trésor also announced plans to borrow a record €340 billion next year to finance the deficit and refinance maturing debt.

France’s 10-year OAT yield surged above 4.95%, reaching its highest level since July 2002, after posting its biggest quarterly increase in nearly four decades. The move came as the minority government unveiled its long-awaited plan to rein in the budget deficit, targeting a reduction to 5% of GDP next year from 5.4% this year. The plan has already drawn scrutiny from the country’s fiscal watchdog, which warned that the budget’s economic assumptions are “optimistic.” French borrowing costs have also risen sharply amid a global bond selloff, with the 10-year yield spread over Germany widening to 150 bps, the highest since 2012, reflecting growing concerns over debt sustainability. With the debt burden expected to exceed 120% of GDP next year and political uncertainty ahead of April’s elections, interest costs are set to climb. Meanwhile, Agence France Trésor plans a record €340 billion of borrowing to finance the deficit and refinance maturing debt.