French Debt Risk Premium Hits Highest Level Since 2011
France’s government borrowing costs have surged as investors grow increasingly concerned about the country’s public finances, political uncertainty and ongoing protests. On Thursday, the premium investors demand to hold French 10-year government bonds over safer German bonds reached 173.58 basis points, its widest level since November 2011 during the euro zone debt crisis. France’s 10-year bond yield climbed to 5.11%, its highest level since July 2002.
Political uncertainty ahead of France’s 2027 presidential election and difficulties in passing the national budget have further weakened investor confidence. The bond sell-off continued despite an improvement in French industrial sentiment in October. Economists at Citi warned that renewed euroscepticism could complicate Europe’s response if financial pressures intensify, although European institutions are considered better equipped to manage crises than they were 15 years ago.
Borrowing costs have also risen across the euro zone amid higher energy prices and expectations of tighter monetary policy. German 10-year bond yields fell to 3.38% as investors sought safer assets, while yield premiums widened in Belgium, Italy, Spain and Greece. Financial markets are currently pricing in approximately three additional European Central Bank rate hikes by late 2027, reflecting concerns about inflation and the economic outlook.
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