I
f our neighbors across the Channel are amused by our political debacle, they should reconsider. "France's instability also has implications for Britain," Mohamed El-Erian, Allianz's chief economic adviser, wrote in an op-ed published Tuesday, October 7, by the Financial Times. The economist highlighted the recent rise in yields on British government bonds.
At the British Steel site in Scunthorpe, Lincolnshire, in eastern England, April 17, 2025. DANNY LAWSON / AFP
The yield on British sovereign debt reached 4.75%, compared to 3.53% for France. Generally, the higher the yield, the riskier the borrower is perceived to be. Since May, the yield gap between the two countries, also known as the spread, has narrowed, reflecting a relatively improved outlook for the United Kingdom among investors. However, the spread has begun to widen again in recent days.
"As vulnerable as France looks right now, it may be arguably less worse off than the UK if bond markets were truly to lose patience with fiscally-loose countries," El-Erian wrote. The reason is clear: British debt is not protected by the European Central Bank.
