France’s 10-year borrowing cost tops 5% again and overtakes US yields

France’s 10-year borrowing cost topped 5% again in early Paris trading on Thursday, a day after touching that level for the first time since 2002^4,5. French borrowing costs have overtaken those of the United States amid budget turmoil⁶. A gauge of French bond risk hit a 15-year high⁸.

The move came as France recovers from its worst urban riots in years and braces for more clashes⁴. Yields on eurozone government bonds rose while Treasury yields fell, widening the French spread³. The French debt risk premium has reached the levels of the euro zone sovereign crisis¹. France’s borrowing costs are at a 24-year high as the riots deepen budget worries⁴.

Why it matters to investors

Accounts differ on how serious the stress is. Analysts expected market pressure to persist in the near term but said the situation remained far from turning into another euro-zone crisis⁴. Others describe crisis-era caution creeping back into French bonds². “As the second largest economy in the euro zone, France may have crossed the line from too big to fail to too big to save,” one commentator said⁷.

Policymakers have signalled no quick backstop. Mario Draghi, former head of the European Central Bank, has said policymakers are unlikely to step in any time soon². France’s messy political situation makes it tricky for the ECB to act⁹. UBP does not expect the ECB to step in for now¹⁰.

Oil is adding to the pressure. Rising oil prices forced the ECB to raise interest rates twice, which has also hit French government debt⁵. Bets on further ECB rate rises have been stable in recent weeks at around three more tightening moves by late 2027¹. Nordea said the ECB’s communication is in focus as French spreads widen¹¹.

US officials are playing down contagion. Treasury Secretary Scott Bessent said he does not anticipate spillover from the selloff⁸.

What to watch

The first test is whether the 10-year yield holds above 5% as further unrest is expected⁴. Any ECB comment on French spreads would be read closely^9,11.

In Switzerland, the franc is being treated as a fever gauge for French credit risk, though Lombard Odier expects the exchange rate to hold steady¹⁰. The ECB, which held rates as markets eye December, is the other institution investors are watching¹¹.