French Bonds, Stocks, Euro Drop as Debt Fears Mount — SkimNews
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- France's 10-year bond yield jumped more than 10 basis points on Monday to just shy of its highest level in decades, while the CAC 40 fell 1.7% and the euro dropped 0.15% against the dollar.
- The OAT-Bund spread — the premium France pays over Germany — hit its widest level since the European Sovereign Debt Crisis of the early 2010s, with French yields now surpassing those of Italy and Greece.
- Overseas investors raised their share of French debt from roughly 48% at the start of 2022 to nearly 60% by early 2026, a shift that could amplify volatility in any risk-off move.
- Hundreds of thousands marched over the weekend protesting political paralysis, the cost of living, and the state of public services, with more than 2,000 arrests reported across Paris, Lyon, and Marseille.
- Prime Minister Sébastien Lecornu's minority government is struggling to negotiate the 2027 budget — a process that has already toppled two of his recent predecessors — while far-right Marine Le Pen tops polls for next year's presidential vote.
- France's deficit sits near 5% of GDP against the EU's 3% limit, and RBC BlueBay Asset Management's Mike Bell warned the country faces a "very real risk" of its own sovereign debt crisis, with the ECB unlikely to intervene unless France complies with its excess-deficit procedure.
Why it matters: Benchmark French borrowing costs are touching their highest level since 2002, with the 10-year yield rising ~10 bps in one session and the OAT-Bund spread exceeding levels seen during the early-2010s eurozone crisis. With a ~5% deficit, a stalled 2027 budget, and Le Pen leading polls, markets are pricing in a fiscal showdown that could force tax hikes or spending cuts before any election mandate exists.
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