FX.co ★ French Borrowing Costs Surge

France’s 10-year OAT yield rebounded to 4.95%, extending its recent surge and hovering near multi-year highs as political turmoil and doubts over fiscal consolidation weighed on market sentiment. Investors are also awaiting Moody’s long-anticipated credit rating review on Friday, with the risk of a downgrade adding further pressure on French government bonds amid a broader global selloff driven by renewed inflation concerns and expectations of higher interest rates.

Authorities have imposed curfews in several cities in an effort to contain nationwide anti-government protests. Nonetheless, additional demonstrations planned for Saturday, together with ongoing negotiations over the 2027 budget, have intensified worries about the government’s capacity to deliver austerity measures ahead of next year’s elections.

Against this backdrop, the 10-year OAT–Bund yield spread widened beyond 150 basis points, reaching its highest level since the eurozone sovereign debt crisis.