The yield on France’s 10‑year OAT fell back below 4.5%, pulling away from last week’s 18‑year highs as oil prices declined on tentative signs of easing geopolitical tensions and improving regional supply. At the same time, worries about France’s public finances intensified after Scope Ratings cut the sovereign rating to A+ from AA‑, citing rising debt, persistent fiscal deficits and limited progress on structural reforms. Morningstar DBRS also revised the outlook on France’s AA rating to negative.
These warnings come as the government struggles to curb expenditure, with the budget deficit now expected to widen to 5.4% of GDP this year, compared with 5.1% projected for 2025. French bond spreads have already widened sharply: the 10‑year OAT–Bund spread briefly climbed above 100 basis points for the first time in 14 years. Political uncertainty ahead of next year’s presidential election is adding to the challenge of building support for the government’s planned fiscal consolidation.
