FX.co ★ French Bond Yields at 2002 High as Fiscal and Political Risks Grow

France’s 10-year OAT yield rose to 4.92%, its highest level since July 2002, as a broad global bond selloff deepened worries over the country’s fiscal position and political stability. The yield spread over equivalent German Bunds widened to 152 basis points, the largest premium since 2011, underscoring mounting investor unease over France’s growing debt burden and limited progress on deficit reduction. Although the government is targeting a reduction of the budget deficit to 5%, deteriorating public finances are making that goal increasingly difficult to reach. The newly proposed budget sets out ambitious spending cuts, but winning parliamentary approval may be difficult amid ongoing political turbulence. France’s debt-to-GDP ratio is nearing 120%, and the sharp rise in borrowing costs is further straining public finances. Investors are also beginning to focus on next year’s presidential election. Elsewhere, Spanish Prime Minister Pedro Sánchez called a snap election after Congress rejected his government’s housing measures.