French yields stop just short of 5% on fiscal concerns
TLT•France’s 10-year bond yield eased 1.5 basis points after reaching 4.9629%, its highest level since July 2002. The gap between French and German 10-year yields reached 133.18 basis points, its widest since May 2012.
1. French yields near 5%
French 10-year government bond yields eased after reaching 4.9629% as the government presented its 2027 budget bill, which seeks to lower the deficit through belt-tightening measures. The spread over German 10-year bonds stood at 127 basis points after reaching 133.18 basis points, its highest level since May 2012.
2. Fiscal and rate concerns
Investors have sold French bonds in recent weeks over expectations for rising policy rates, high debt levels and political risk ahead of the 2027 presidential election. France plans a record bond sale next year, while analysts said a possible downgrade to growth forecasts could make its 5% deficit target harder to meet. Euro zone yields fell from recent highs, while markets priced in one European Central Bank rate hike by December and a small chance of a second.
