France’s 10-year OAT yield jumped to 4.9% on Thursday, its highest level since June 2002, ahead of the government’s budget presentation. The administration is preparing to unveil a €54 billion fiscal consolidation package designed to narrow the budget deficit to 5% of GDP by 2027, down from 5.4% this year.
The plan is expected to focus on pensions, public-sector pay, and other politically sensitive areas of expenditure, while prolonging a one-off tax on large corporations. France’s borrowing costs have climbed sharply amid a global bond sell-off, pushing the yield spread on 10-year bonds over Germany to 127 basis points on Wednesday—close to levels last seen during the euro-area sovereign debt crisis.
Rising yields, combined with a debt load projected to exceed 120% of GDP next year, are also inflating interest costs. The government now expects its interest bill to reach €91 billion in 2027.
