France’s borrowing costs reached their highest levels in years as investors grew concerned about the government’s ability to pass a budget amid domestic turmoil. The yield on French 10-year government bonds climbed nine basis points to 5.089% in early trading Thursday, marking its peak since July 2022. The rate crossed above the 5% mark for the first time since 2002, and French debt became more expensive to finance than equivalent US Treasury bonds for the first time since 2013.
The spike in French yields reflected anxiety about the country’s fiscal situation and recent political events. The government faces parliamentary obstacles in advancing proposed reforms, including plans to increase the state pension age from 62 to 64 and spending reduction measures. The budget deficit stood at 5.1% of gross domestic product in 2025, while the national debt reached 115.6% of GDP. Political instability intensified following widespread protests that escalated into violence over the previous weekend, resulting in nearly 2,400 arrests, looted businesses, and attacks on public buildings across multiple cities.
The yield spread between French and German 10-year bonds expanded to its highest point in almost 15 years, signaling increased risk premium on French debt. Market analysts noted that the French bond selloff had begun affecting other European markets, with widening spreads observed in Italian and Spanish government bonds as well. The rising yields have complicated the outlook for European monetary policy heading into the European Central Bank’s decision next week. Some financial specialists suggested that without resolution to France’s fiscal challenges, bond market dynamics could effectively constrain future rate-hiking opportunities for the ECB, which last increased its key rate to 2.5% in September.
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