France's 10-year borrowing costs climbed to their highest level in almost 15 years on Thursday as investors grew concerned about the government's ability to pass a budget amid political turmoil and recent violent protests. The yield on French 10-year bonds, known as obligations assimilables du Trésor, rose by nine basis points to 5.089% in early trading, surpassing the 5% threshold for the first time since 2002. The gap between French and German 10-year borrowing costs, which measures the risk premium investors demand for holding French debt, reached its widest point in nearly 15 years. For the first time since 2013, France's borrowing costs exceeded those of the United States.
The bond market turmoil reflects deepening concerns about France's fiscal position. The country's budget deficit stood at 5.1% of gross domestic product in 2025, while its overall debt reached 115.6% of GDP. Parliamentary gridlock has blocked President Emmanuel Macron's plans to raise the state pension age from 62 to 64 and other spending controls. The country is also contending with higher inflation triggered by the war in Iran, putting additional pressure on governments carrying large debt burdens.
The selling in French government bonds has begun to spread to other eurozone nations. Italy's 10-year spread over German bonds widened by 3.8 basis points to 116 basis points, while Spain's spread widened by 3.1 basis points to 66 basis points, marking Spain's widest level since June 2025, according to Jim Reid, a market strategist at Deutsche Bank.
The bond market stress comes as France recovers from widespread protests that turned violent over the weekend. Tens of thousands attended peaceful marches demanding more teachers and school repairs, but clashes with police erupted in Paris, Bordeaux, Nice and Marseille. Public buildings were attacked and thousands of shops looted, with the interior ministry reporting nearly 2,400 arrests.
Market analysts say the rising yields may influence European monetary policy. Carsten Brzeski of ING said the European Central Bank, which last raised its key rate to 2.5% in September, is likely to hold rates next week and delay any further increases to December. He warned that without a solution to France's fiscal problems, bond markets could effectively take over the ECB's role in restraining borrowing conditions.
For UK savers and investors, French financial stress could increase volatility in European bond and equity markets and influence decisions by the European Central Bank that indirectly affect UK financial conditions.