French benchmark bond yield climbs above 5 per cent
The spread over Germany’s equivalent bond approached 160 basis points amid a parliamentary dispute over France’s 2027 budget.
Investors pushed the yield on France’s benchmark 10-year government bond above 5 per cent on 21 October 2026, demanding more compensation to hold its debt. The yield had not been that high since the dot-com financial crisis.
The gap over the German 10-year bond widened to almost 160 basis points. French yields have climbed for weeks while parliament debates the 2027 budget, with Prime Minister Sebastien Lecornu seeking €43 billion in spending cuts without a political majority to support them.
France’s debt amounts to around 120 per cent of GDP, against an EU limit of 60 per cent. Approval of the proposed budget would still leave the 2027 deficit at 5 per cent of GDP, exceeding the EU’s 3 per cent ceiling.
Moody’s is due to decide on France’s sovereign credit rating, and most economists expect a downgrade. The French Treasury’s OAT bond also serves as a reference for interest rates across much of the economy, so the increase in yields could feed through to borrowing costs faced by businesses and households.
