Yield on 10-year French bonds reaches 5% — The Guardian

In France, the yield on benchmark 10-year government bonds rose by more than 8 basis points during morning trading and reached 5%, before easing slightly to 4.99%. This happened for the first time in 24 years, The Guardian reports.

Budget uncertainty

The French government has still not adopted a budget for next year. The political situation is complicated by the fact that no party has held a majority in parliament since President Emmanuel Macron called snap elections in 2024.

The parliamentary deadlock has blocked Macron's plans to raise the retirement age from 62 to 64, as well as a number of measures to cut or reallocate public spending. France's budget deficit in 2025 stood at 5.1% of GDP, while public debt was 115.6% of GDP. Forecasts envisage further growth in both indicators in the current fiscal year without corrective decisions.

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Protests and market reaction

The country has been gripped by increasingly violent street protests in recent weeks. They began in September with student demands for increased school funding due to mold, rats, teacher shortages, and overcrowded classrooms, and later developed into broader demonstrations against the rising cost of living.

According to the publication, initially peaceful rallies were often accompanied by harsh police actions, after which riots occurred in many cities. Shop looting was recorded, including at Louis Vuitton, while protesters set fire to the city hall in Limoges.

International creditors have become more cautious about lending money to Paris. Some Japanese fund managers have stopped providing loans to France, while the remaining creditors demanded higher yields, especially on long-term borrowing. Matthew Ryan, head of market strategy at the Ebury platform, said that political risk in France is also putting pressure on the euro's exchange rate against other major currencies.