French Bond Selloff Eases as Yield Spread Narrows

2026-10-06 09:35 By Joana Ferreira 1 min. read

France’s 10Y OAT yield fell to 4.75%, retreating from the more than two-decade high above 5% reached late last week.

The spread over German 10-year yields also narrowed as investors reassessed whether the recent surge in France’s risk premium had been too sharp and rapid.

French borrowing costs have risen sharply in recent weeks, with the yield gap over Germany reaching its widest level since the 2011 Eurozone debt crisis amid concerns over France’s fiscal position ahead of next year’s presidential election.

France is set to formally submit its 2027 budget today, while far-right presidential candidate Marine Le Pen is expected to outline plans to cut government spending by €25 billion a year.

Elsewhere, bond-market turmoil has prompted investors to scale back expectations for further ECB rate hikes.

Markets now price an 80% chance of another hike by year-end, while ECB Chief Economist Philip Lane said higher borrowing costs could curb demand and reduce the need for further tightening.



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