French yields jump, Treasuries edge higher

French government borrowing costs have risen sharply, with the 10-year bond yield breaking above 5% and reaching levels not seen since the early 2000s. The 10-year OAT yield rose by nine basis points to 5.089% in early trading on Thursday, after having already moved through the 5% threshold on Wednesday for the first time since 2002. Earlier, the French 10-year yield had closed at 5.009%, after touching an intraday high of 5.022%, the highest such level since July 2002.

The shift marks a significant deterioration in funding conditions for France and places its long-term borrowing costs among the highest in the euro area. The rise reflects sustained selling of French government bonds as investors demand greater compensation for perceived fiscal and political risks.

The gap between French and German 10-year yields has widened markedly, with the risk premium over Bunds reaching 173.58 basis points. This spread is the widest since November 2011, during the euro zone debt crisis, and represents its highest level in almost 15 years. The move underscores growing unease about France’s fiscal position compared with the euro area benchmark.

France’s budget deficit stood at 5.1% of gross domestic product in 2025, while public debt amounted to 115.6% of GDP. Investors are focused on the government’s difficulties in passing a budget for next year and concerns over plans to rein in state spending, which have been complicated by parliamentary gridlock.

As French borrowing costs have climbed, the 10-year OAT yield has moved above the equivalent U.S. Treasury yield for the first time since 2013. This inversion of the usual relationship highlights how quickly perceptions of French sovereign risk have shifted. It also signals that investors now require a higher return to hold French debt than they do for long-dated U.S. government bonds of the same maturity.

The premium investors demand to hold French bonds reflects both domestic budget challenges and broader concerns about heavily indebted governments facing higher global interest rates. Market strategists have noted that the sell-off in French government bonds is beginning to affect sentiment toward other issuers as well.

The rise in yields has coincided with a period of social unrest. France is recovering from widespread protests that turned violent last weekend, with clashes between different groups and police in major cities including Paris, Bordeaux, Nice and Marseille. Public buildings were attacked, and thousands of shops and businesses were looted, with the interior ministry reporting nearly 2,400 arrests.

At the same time, political tensions have hindered efforts to overhaul public finances. Parliamentary gridlock has blocked proposals to raise the state pension age from 62 to 64 and to implement other measures aimed at containing state spending. These obstacles have added to doubts over the country’s ability to repair its public finances.

While the sharpest moves were seen in France and across the euro area, U.S. Treasury yields have also ticked higher. On Wednesday, the 10-year Treasury yield rose by 0.029 percentage point to 5.145%, while the 2-year yield climbed by 0.038 percentage point to 4.823%, its largest one-day gain since late September. The 30-year yield increased by 0.012 percentage point to 5.437%.

A key focus in the U.S. was a 20-year Treasury bond auction that met softer-than-expected demand. The Treasury sold $13 billion of 20-year bonds at a high yield of 5.469%, the highest clearing yield for this maturity since January 8, 1986. Treasury resumed issuing 20-year bonds in May 2020 after having discontinued them in 1986, and the latest auction result highlights the higher borrowing costs now facing the U.S. government as well.