French Bond Yields Near 24-Year High

France’s 10-year OAT yield climbed toward 5%, extending its recent surge and hovering near 24-year highs as social unrest and concerns over fiscal consolidation weighed on sentiment. Investors are also awaiting Moody’s long-anticipated credit rating review on Friday, with the risk of a downgrade adding pressure to French bonds amid a broader global selloff driven by renewed inflation concerns and expectations of higher interest rates. Authorities imposed curfews in several cities to contain nationwide anti-government protests, while further demonstrations planned for Saturday amid ongoing negotiations over the 2027 budget have raised doubts about the government’s capacity to implement austerity measures ahead of next year’s elections. The 10-year OAT-Bund spread, the extra yield investors demand to buy riskier bonds, widened beyond 150 basis points, its highest level since the eurozone sovereign debt crisis.

France’s 10-year OAT yield edged down to 4.9% after surging on Monday, remaining near multi-year highs as political unrest and concerns over the government’s ability to rein in the budget deficit continued to weigh on sentiment. Investors are also bracing for Moody’s long-awaited credit rating review on Friday, with a potential downgrade adding to pressure on French government bonds amid a broader global selloff driven by renewed inflation concerns and expectations of higher interest rates. Authorities imposed curfews in several cities to contain nationwide anti-government protests, further complicating efforts to implement austerity measures ahead of the 2027 elections. Meanwhile, the National Assembly is set to vote on the revenue section of the 2027 draft budget on Tuesday, although approval would not guarantee passage of the full bill. The 10-year OAT-Bund yield spread remained broadly unchanged at 147 basis points, its widest level since the eurozone sovereign debt crisis.

France’s 10-year OAT yield surged 15 bps to 4.94%, putting it on track for its biggest one-day increase since March 2025 and bringing it close to its highest level in more than two decades. Escalating social unrest and persistent political deadlock have added to mounting pressure on the country’s already weakened bond market. Mass protests over the rising cost of living and worsening conditions in schools swept across France over the weekend, with violence and looting reported in several cities. The unrest comes as the government struggles to pass a budget and curb public debt ahead of next year’s presidential election. Continued political uncertainty risks keeping borrowing costs elevated, further undermining efforts to restore investor confidence in France’s public finances. French government bonds have also been caught in a broader global bond selloff, fueled by renewed inflation concerns, expectations of higher interest rates, and growing anxiety over rising government debt levels.