France just joined a club nobody wants to be part of. The country’s 10-year government bond yield punched through 4% this week, touching 4.03% on July 23, a level not seen since June 2009. That was the tail end of the Global Financial Crisis, when the world was still picking through the rubble of Lehman Brothers.
What’s driving France’s bond selloff
The core issue is fiscal math that simply doesn’t add up. France’s budget deficit is projected to exceed 6% of GDP, a figure that would make even the most lenient EU budget hawks uncomfortable. For context, the EU’s Stability and Growth Pact technically caps deficits at 3% of GDP. France is running at double that threshold.
The 10-year yield eased slightly to 4.00% on July 24, suggesting markets paused to catch their breath.
Look at the longer end of the curve. France’s 30-year bond yield climbed above 4.73% in mid-July, also hitting levels not witnessed since the 2008 financial downturn.
