Lowest Spreads and Flexible Terms.
French bond yields are rising – fiscal risk in the EU is increasing
French debt under pressure as the gap with Germany widens to levels not seen in years
The sovereign bond market in 2026 has clearly pushed up borrowing costs for many countries, but France has found itself in a particularly difficult position. The clearest sign is the spread between 10-year French and German bond yields, which is now the highest since the eurozone crisis. A yield is simply the return investors expect from a debt security. The higher it is, the more expensive it is for a country to borrow money.
This is not only about Paris. Since the beginning of March, the selloff in bonds has hit almost the entire world, including the USA, Japan, the United Kingdom and many continental European countries, including Poland. In mid-September, the yield on 10-year U.S. government bonds rose above 5% and was the highest since 2007. British securities were yielding as much as 5,44%, German ones 3,57%, and Japanese bonds rose above 3% for the first time in 30 years.
Against this backdrop, France stands out especially sharply. The yield on its 10-year bonds has risen to nearly 4,70% from 3,25% at the end of February. That is the highest level since 2008 and also more than one hundred basis points above comparable German bonds. A basis point is one hundredth of a percentage point, so such a gap is already very large for the market.
Why investors are cautious about France
Some economists believe the rise in yields is simply a correction after years of exceptionally low interest rates. Others see it as a sign of lost confidence in politicians and central bankers, and as a result of a prolonged period of high inflation. There is also the question of whether higher debt costs are just a consequence of the energy crisis, or already a symptom of a deeper problem in the public finances of the largest economies.
France also has weak fiscal fundamentals. Public debt stands at 115,6% of GDP, and the deficit has remained around 5% of GDP since 2020. The 2027 budget plan also assumes a deficit of about 5% of GDP. In practice, that means the state is spending more than it takes in, and has been doing so for years.
There is also an ongoing dispute over who should tighten the belt and how. Successive governments in Paris have been unable to push through even modest spending cuts. Bank of France Governor Emmanuel Moulin told RTL radio that the situation is worrying and unsatisfactory, though he stopped short of calling the economy endangered. According to INSEE, France’s economy is set to grow by just 0,4% this year, down from an earlier forecast of 0,7%.
On top of the economic strains, there is a volatile political scene. The current National Assembly is fragmented and polarized, and presidential elections are due in spring 2027. Under these conditions, it is hard to build a stable majority that could quickly put the public finances in order.
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