French bonds and stocks fall after mass protests — The Guardian
France saw a fresh sell-off in government bonds and stocks after violent protests over the weekend. Public buildings were set on fire during the unrest, hundreds of shops were looted, and the number of arrests reached nearly 2,400 people, The Guardian reports.
Rising borrowing costs
The yield on 10-year French government bonds rose by seven basis points to 4.849%. A rise in yields means a fall in bond prices. The gap between the cost of 10-year borrowing for France and Germany widened; this indicator reflects the risk premium on French debt.
The yield on France's two-year bonds increased by 2.5 basis points to 3.571%, while that on 30-year bonds rose by three basis points to 5.397%. The CAC 40 index lost 1% at the start of trading in Paris, while the pan-European Stoxx Europe 600 fell by 0.4%. The euro weakened by 0.13% against the US dollar to $1.122.
Protests and budget pressure
According to France's Interior Ministry, police used tear gas during clashes with protesters. French President Emmanuel Macron condemned the “unrestrained violence” in a televised address.
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The unrest erupted after several weeks of peaceful demonstrations over the condition of schools and the cost of living. Tens of thousands of participants demanded more teachers and repairs to dilapidated school buildings. Clashes with police took place, among other locations, in Paris, Bordeaux, Nice and Marseille.
Deutsche Bank analyst Jim Reid said the protests would make it more difficult for international investors to buy French government bonds. In his view, the weekend's events added political risks for markets amid France's difficult budget situation and the approaching 2027 elections.
The French government is preparing a budget that cuts pension spending and funding for government agencies, except for defense. The article notes that political pressure could hinder these plans, increase borrowing volumes and raise public debt.
