French bond spread at highest since 2012 as default insurance spikes

France is proving particularly vulnerable in the bond selloff as it faces a challenging budget and struggles to get its fiscal position in order ahead of a presidential election next year that could make that task even harder.

France's government plans to include a €54 billion ($62 billion) savings drive in its 2027 budget to stop the fiscal deficit spiralling out of control, Prime Minister Sebastien Lecornu said on Thursday, as protests over high fuel prices swell.

It will already miss this year's budget deficit target as the economy will grow less than previously expected this year.

"Investors in general they are not too confident in stepping (in) and buying, and I think that's what is driving this ongoing grind wider in spreads," said Evelyne Gomez-Liechti, multi-asset strategist at Mizuho in London, adding that the bank was seeing little flow in French debt.

"Everyone is sidelined and not willing to buy here just in case it keeps grinding wider and wider."