French borrowing costs surpass US for first time since 2013 amid budget crisis and protests

French 10-year bond yield breaks above 5% as political gridlock and violent demonstrations rattle investors

By LineZotpaper

Published22 October 2026

Updated22 October 2026

Read Time2 min

Sources3 outlets

France's 10-year borrowing costs have risen above those of the United States for the first time in more than a decade, as investor confidence erodes over the government's failure to pass a federal budget and widespread protests that turned violent over the weekend. The yield on French bonds rose to 5.089% on Thursday, its highest level since July 2022, crossing the 5% threshold for the first time since 2002.

The sell-off in French government debt pushed 10-year yields past equivalent US Treasury yields for the first time since 2013, according to market data. The difference between French and German 10-year borrowing costs, a key risk premium measure, rose to its highest level in almost 15 years.

The volatility comes as France struggles to approve next year's budget. Tens of thousands of people held peaceful marches demanding more teachers and repairs to run-down schools, but clashes with police erupted in Paris, Bordeaux, Nice and Marseille. Public buildings were attacked, and thousands of shops and businesses were looted. The interior ministry reported nearly 2,400 arrests.

A parliamentary deadlock has blocked President Emmanuel Macron's plans to raise the state pension age from 62 to 64 and implement measures to curb state spending. France's budget deficit stood at 5.1% of gross domestic product in 2025, while public debt reached 115.6% of GDP. Higher inflation, triggered by the war in Iran, has added to the pressure on heavily indebted governments.

Jim Reid, a market strategist at Deutsche Bank, said the French sell-off was spilling over to other countries. "Among others, the Italian 10-year spread over [German bonds] widened 3.8 basis points to 116 basis points, while Spain's widened 3.1 basis points to 66 basis points, marking its widest level since June 2025," he said.

Carsten Brzeski of ING said rising yields had reinforced the European Central Bank's restrictive monetary policy stance ahead of its interest rate decision next week. The ECB last raised its key rate to 2.5% in September. "The ECB is very likely to stay on hold next week and will delay any next rate hike decision to December," Brzeski said. "Any solution to the current French fiscal woes could bring some relief to bond markets and allow the ECB to continue hiking rates. Without any solution, bond markets have taken over the ECB's role, making rate hikes less likely."

Analysis

Why This Matters

French borrowing costs overtaking US Treasuries signals a loss of investor confidence in one of the eurozone's largest economies, with potential knock-on effects for other heavily indebted European nations.
The budget deadlock and violent protests raise the risk of a prolonged political crisis, which could deepen France's fiscal troubles and complicate ECB policy decisions.
If yields remain elevated, France's debt servicing costs increase, squeezing public spending further and potentially triggering broader market volatility.

Background

France has faced persistent fiscal challenges, with a budget deficit well above the EU's 3% limit and a debt-to-GDP ratio exceeding 115%. Efforts to rein in spending, including pension reform, have met strong public opposition. The current crisis combines parliamentary gridlock over the 2026 budget with the worst civil unrest in years, set against high inflation partly driven by geopolitical tensions involving Iran. The European Central Bank has been raising rates to combat inflation, but tighter financial conditions now threaten to worsen France's debt dynamics.

Key Perspectives

Investors and bond markets: Markets are pricing in a higher risk premium on French debt due to political instability and deteriorating public finances. Rising yields increase the cost of servicing France's large debt pile, creating a feedback loop that could further undermine confidence.

The French government and Macron: The administration is struggling to push through fiscal consolidation measures amid parliamentary opposition and public anger. Without a budget deal, investor sentiment is likely to remain fragile, and the government risks losing control over borrowing costs.

The European Central Bank: The ECB faces a dilemma: higher French yields already tighten financial conditions, reducing the need for further rate hikes. However, a failure to contain the situation could allow sovereign stress to spread and complicate the ECB's inflation-fighting mandate.

What to Watch

The ECB's interest rate decision next week and any comments on the French situation.
Whether the French parliament can reach a budget agreement in the coming weeks.
Further spread widening to Italian and Spanish bonds, indicating contagion risk.
Any escalation or de-escalation of protests and arrests.

Sources

French borrowing costs overtake US amid budget turmoil · World news | The Guardian
France’s Debt Crisis Deepens as Foreign Investors Look for the Exit · WSJ.com: Markets
French borrowing costs overtake US amid budget turmoil · Business | The Guardian

Checked

12 claims in this story checked against 1 source: 8 supported.

Show each claim

SupportedFrench 10-year borrowing costs overtook US Treasury yields for the first time since 2013.World news | The Guardian: “The move lifted France’s 10-year borrowing costs over the equivalent for US Treasury bonds for the first time since 2013.”
SupportedThe French yield broke above 5%.World news | The Guardian: “It broke across the 5% threshold on Wednesday for the first time since 2002.”
Partly supportedPolitical gridlock and violent demonstrations rattled investors.World news | The Guardian: “investors fret that France’s government is struggling to pass a federal budget after public protests gripped the country.”
Partly supportedInvestor confidence eroded over the government's failure to pass a federal budget.World news | The Guardian: “investors fret that France’s government is struggling to pass a federal budget”
SupportedJim Reid said: “Among others, the Italian 10-year spread over [German bonds] widened 3.8 basis points to 116 basis points, while Spain's widened 3.1 basis points to 66 basis points, marking its widest level since June 2025,”World news | The Guardian: ““Among others, the Italian 10-year spread over [German bonds] widened 3.8 basis points to 116 basis points, while Spain’s widened 3.1 basis points to 66 basis points, marking its widest level since June 2025,” he said.”
SupportedCarsten Brzeski said the ECB was very likely to stay on hold next week and delay its next rate-hike decision to December.World news | The Guardian: ““The ECB is very likely to stay on hold next week and will delay any next rate hike decision to December,” he said.”
SupportedThe French 10-year yield rose to 5.089% on Thursday, its highest level since July 2022.World news | The Guardian: “The yield on the French 10-year bond – known as obligation assimilables du Trésor ( Oat ) – rose by nine basis points to 5.089% in early trading on Thursday, its highest level since July 2022.”
Partly supportedThe yield crossed 5% on Thursday for the first time since 2002.World news | The Guardian: “It broke across the 5% threshold on Wednesday for the first time since 2002.”
Not in the sourcesThe US-yield comparison is according to market data.
SupportedThe French-German 10-year borrowing-cost difference rose to its highest level in almost 15 years.World news | The Guardian: “the difference between French and German 10-year borrowing costs – a metric for the risk premium attached to French debt – rising to its highest level in almost 15 years.”
SupportedFrance’s budget deficit was 5.1% of GDP in 2025.World news | The Guardian: “France’s budget deficit was 5.1% of gross domestic product in 2025”
SupportedFrance’s public debt reached 115.6% of GDP.World news | The Guardian: “while its debt pile stood at 115.6% of GDP.”