French Bonds Hit 10-Year Highs : What’s Driving The Shift ?

While most European bond markets show relative stability, the situation in France raises serious concerns. The yields on 10-year sovereign bonds have reached 3.05 %, an exceptionally high level for a major eurozone economy. This trend reflects a combination of economic tensions and political dysfunctions, which amplify doubts about the country’s budgetary management. With a public debt exceeding 112 % of GDP and a deficit stagnating beyond 6 %, France stands out as a worrying case within the European Union. These developments signal a loss of investor confidence, but they also highlight the urgency for structural reforms to prevent an even sharper degradation of its position in financial markets.

A Growing Tension on French Bonds

French bonds, long considered a safe investment, are undergoing an unprecedented crisis of confidence. This year, the rating agency Moody’s has downgraded the rating of French debt, citing “increased risks related to the absence of a clear budgetary trajectory.” Thus, this observation sheds light on structural weaknesses in the country’s economic management. France, which represents the second-largest economy in the European Union, finds itself in a prolonged political uncertainty, exacerbated by the lack of a validated budget for 2025. To address this legislative void, a special law has been adopted to ensure the continuity of public services. However, this transitional measure has not been sufficient to calm investors’ concerns.

Financially, the indicators show a critical situation. Public debt now reaches 112 % of GDP, while the budget deficit remains above 6 %, levels that are hardly sustainable for an economy of this size. These figures reflect a trajectory of increasing indebtedness, as noted by Frank Gill, an analyst at S&P Global Ratings: “the trajectory of debt will continue to rise without significant adjustments.” Meanwhile, other economies in the eurozone, once seen as more vulnerable, are managing to stand out. Countries like Portugal and Greece, through rigorous budgetary reforms and sustained economic growth, now enjoy more competitive bond yields. This contrast underscores the urgency for France to adopt measures capable of restoring confidence in the markets.

The Example of Peripheral Economies : A Diverging Trajectory

While France struggles to convince investors, other eurozone countries, once perceived as vulnerable, are demonstrating remarkable economic resilience. Portugal and Greece, in particular, are now reporting budget surpluses accompanied by solid growth rates, performances that enhance their credibility in financial markets. Frank Gill highlights this development: “Greece’s 10-year yield has dropped by 0.5 % this year, a trend that could continue if their debt continues to decrease relative to GDP.” These advances are part of a dynamic where budgetary rigor and proactive debt management have allowed these countries to restore their image.

This turnaround relies on rigorous political choices, including an accelerated reduction of indebtedness and convergence with German standards in budgetary discipline. This strategy has allowed them to lower their borrowing costs but also to sustainably improve market perceptions. In contrast, France seems confronted with structural obstacles that hinder its capacity to implement large-scale reforms. This contrast illustrates a systemic problem within the eurozone, where increasing disparities in public finance management may further weaken economic cohesion if corrective actions are not taken swiftly.

By widening the gap with countries that were previously considered less solid, France fuels a sense of uncertainty that could weigh on its ability to finance its economy under favorable conditions. This situation highlights the urgent need for ambitious measures to restore investor confidence and prevent the disparities between European economies from turning into irreparable fractures.

Without ambitious and immediate measures, France risks seeing its bond yields continue to rise, thereby increasing the cost of its public debt. In the short term, the absence of a clear budget for 2025 maintains strong uncertainty, further reinforcing investor caution. However, a recovery is still possible. The adoption of structured budgetary reforms and the restoration of confidence in the markets could enable the country to stabilize its finances. The decisions made in 2025 will play a key role in redefining France’s economic trajectory, as well as in preserving the financial balance of the European Union in the face of growing divergences among its members.