France’s borrowing costs have surged to their highest level in more than two decades amid a global sell-off in bond markets, as high debt and deficit levels, along with concerns that rising oil prices could prolong inflation, add pressure to French government bonds.
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The yield on France’s 10-year government bonds reached 4.96% last Thursday, the highest level since 2002. The spread between French and German 10-year bonds also widened to around 133 basis points, its highest level since the eurozone debt crisis in 2012.
The widening spread with Germany is particularly significant because it indicates the higher risk premium investors are demanding to hold French debt. This suggests that the pressure on France is not solely linked to the global bond sell-off, but also reflects concerns over the country’s public finances.
The pressure comes as France’s public debt reached a record €3.595 trillion at the end of the second quarter of 2026, rising by €59.6 billion in just three months. Debt stood at 119% of gross domestic product, up from 117.5% at the end of the first quarter, according to France’s National Institute of Statistics.
Paris is seeking to reassure investors through measures aimed at improving public finances and reducing the budget deficit to 5% of GDP in 2027. Markets are closely watching the government’s ability to implement its fiscal plans and contain the continued rise in debt.
The pressure has also directly affected the cost of new borrowing. On October 1, France’s Treasury sold nearly €12 billion worth of long-term bonds, with yields ranging from 4.93% to 5.40%, depending on maturity. This compares with an average yield of 3.55% on French bond issuances during 2026 through the end of September.
The rise in French bond yields came as part of a broader sell-off in global bond markets, as investors reassessed the outlook for inflation and interest rates amid concerns that higher oil and energy prices could keep inflationary pressures and borrowing costs elevated for longer.
So far, the developments have not indicated that France is facing difficulties accessing financial markets, as demand for its bond issuances has remained solid. The main risk, however, is the higher price investors are now demanding to finance French debt.
If yields remain elevated, issuing new debt and refinancing maturing obligations will gradually become more expensive, increasing interest costs and adding further pressure on France’s public finances.
