Five French market hot spots on investors' radars amid debt jitters
EWQ•French markets face growing pressure from debt concerns and political gridlock: the spread between French and German 10-year borrowing costs topped 110 basis points, while French five-year credit default swaps reached 52 basis points. France's stock market was down 0.5% this year, and the OECD expects 0.4% growth in 2026.
1. Bond pressure rises
The spread between French and German 10-year borrowing costs climbed above 110 basis points, its highest level since the euro zone crisis in 2012. One fixed-income manager said the spread could reach 200 basis points, a level that would likely attract buyers because of the yields on offer. Investors have also shorted French bond futures, though a strategist said some of the recent decline reflects a global bond selloff.
2. Stocks and credit risks
France's stock market was down 0.5% this year, compared with an approximately 8% gain for broader European markets. The OECD expects France's economy to grow 0.4% in 2026, versus 1% for the broader euro zone. French five-year credit default swaps reached about 52 basis points, their highest since April 2017 and double their level six months earlier; French bank CDS also reached their highest since April 2025.
3. Politics and euro concerns
Investors are watching the 2027 presidential election, with analysts saying a runoff between Marine Le Pen and Jean-Luc Melenchon could hit French markets hard. Scope downgraded France, and Moody's could follow in late October. The euro fell below $1.14 to a three-month low, while traders anticipated at least three rate increases by April; an analyst said three hikes seemed aggressive.
