French Bond Yields Hit 20-Year High Amid Fiscal Crisis
France faces a severe bond market rout and record public debt as political gridlock and upcoming elections drive borrowing costs to their highest levels since 2002.
French ten-year government bond yields surged to 4.94% on October 1, 2026, the highest level since 2002. This selloff has widened the spread between French bonds and German Bunds to 152 basis points, a peak not seen since 2011. France now pays more to borrow than Italy and Greece, while the cost of insuring its sovereign debt via credit default swaps has nearly tripled in one month to 87 basis points.
Sébastien Lecornu, the Prime Minister, has proposed a 2027 budget featuring between 43 billion and 54 billion euros in spending cuts to reduce a deficit that is expected to miss the 5% GDP target. Public debt has reached a post-war peak of 3.596 trillion euros, or 119% of GDP. Investors remain skeptical of these cuts due to a fragmented National Assembly and political instability ahead of next spring's presidential election.
Political candidates have offered diverging paths. Radical-left candidate Jean-Luc Mélenchon proposed canceling government bonds held by the European Central Bank, a move ECB President Christine Lagarde rejected as a violation of EU treaties. Meanwhile, far-right leader Marine Le Pen has pledged to lower the retirement age to 60, adding to market concerns over fiscal sustainability. The Haut Conseil des finances publiques has labeled the government's deficit reduction goals as highly improbable, while the Bank of France lowered its growth forecast to 0.4% for the year.
