France’s 10-year bond yield rises above 5% amid budget gridlock

French borrowing costs exceed U.S. Treasury equivalent for first time since 2013

France’s 10-year government bond yield broke across the 5% threshold on Wednesday for the first time since 2002 and rose by nine basis points to 5.089% in early Thursday trading, its highest level since July 2022. Another bout of selling weighed on French government bonds as investors fretted over the government’s struggle to pass a budget for next year and the country’s recovery from widespread protests that turned violent over the weekend.

The move lifted France’s 10-year borrowing cost above the equivalent for U.S. Treasury bonds for the first time since 2013, according to The Guardian. FRED’s vintage daily reading for Oct. 22 put the U.S. 10-year Treasury yield at 5.12%; the French figure was an early-session observation on Thursday.

The difference between French and German 10-year borrowing costs — a metric for the risk premium attached to French debt — rose to its highest level in almost 15 years.

Parliamentary gridlock has blocked President Emmanuel Macron’s plans to increase the state pension age from 62 to 64 and a series of measures designed to rein in state spending. France’s budget deficit was 5.1% of gross domestic product in 2025, while its debt pile stood at 115.6% of GDP.

Tens of thousands of people attended peaceful marches demanding more teachers and repairs to decrepit schools, while different groups clashed with police in cities including Paris, Bordeaux, Nice and Marseille in recent days. Public buildings were attacked and thousands of shops and businesses were looted. France’s interior ministry reported nearly 2,400 arrests.

The Guardian reported that France was also grappling with higher inflation triggered by the war in Iran, a situation the outlet said left many governments with big debt piles under acute pressure.

Jim Reid, a market strategist at Deutsche Bank, said the sell-off in French government bonds was starting to ripple out to other countries. Reid said that, among others, the Italian 10-year spread over German bonds widened by 3.8 basis points to 116 basis points, while Spain’s widened by 3.1 basis points to 66 basis points, marking its widest level since June 2025.

Carsten Brzeski of ING said rising yields had reinforced the European Central Bank’s “restrictive” monetary-policy stance before its interest rate decision next week. The ECB last raised its key interest 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.”

As MSI reported on Oct. 6, France’s 10-year borrowing cost had climbed toward 5%, its highest level since 2002. By Thursday the bond had crossed 5% for the first time since 2002 and moved above the comparable U.S. Treasury yield for the first time since 2013, extending the sell-off while budget passage remained unresolved.