France's government bond market came under fresh pressure on Monday after violent protests over the weekend left public buildings burned and hundreds of shops looted across the country. The interior ministry said almost 2,400 people were arrested, with police deploying teargas during confrontations with protesters. President Emmanuel Macron condemned the "unbridled violence" in a televised address on Sunday night.
The turmoil has rattled investors holding French government debt. The yield on the country's 10-year bond rose by seven basis points to 4.849%, while the two-year yield climbed by 2.5 basis points to 3.571%. The 30-year bond, a benchmark for France's long-term borrowing costs, rose by three basis points to 5.397%. These moves widened the gap between French and German 10-year borrowing costs, a key measure of the risk premium attached to French debt.
Jim Reid of Deutsche Bank warned that the unrest "won't make it easy for the international community to be totally comfortable buying OATs", France's government bonds. He noted that "with France already facing a difficult fiscal backdrop and the 2027 election approaching, the weekend adds another layer of political risk for markets."
Rising borrowing costs will strain France's public finances at a difficult moment. France's debt-to-GDP ratio stood at 115.6% in 2025, with a budget deficit of 5.1%, both higher than the UK's 94.3% and 4.3% respectively. The government is preparing a budget involving cuts to pensions and departmental spending, but political pressure from the unrest threatens those plans.
The turmoil also spilled into currency and equity markets. The euro fell by 0.4% against the US dollar to $1.1197 in early trading on Monday. France's Cac 40 index of large-cap stocks dropped by 1% at the open, while the broader Stoxx Europe 600 fell by 0.4%.