French bond yield rises to 4.9% amid unrest, euro recovers on Tuesday
Key Facts
France's 10-year bond yield rose to 4.9% during Monday's trading as the fallout from unrest spread to financial markets, according to Reuters. The yield rose 13 basis points during the session amid the country's protest crisis. The spread between French bonds and benchmark German bonds reached 146 basis points, reflecting market pricing of French sovereign debt relative to its German counterpart. In currency markets, the euro recovered slightly on Tuesday morning as unrest eased overnight, according to Reuters. The European currency's recovery followed a decline on Monday, as security developments shifted between the two sessions.
Monday's losses extended to French bank shares, with BNP Paribas falling 3%, according to Reuters. Societe Generale shares recorded the same percentage decline during trading, alongside rising sovereign bond yields. On business activity, the Federation of Commerce and Distribution said nearly 3,000 stores were affected by the weekend's unrest. Reuters reported the estimate on Monday as the fallout from the violence spread to stores and their operations. Prime Minister Sebastien Lecornu said the government would provide partial unemployment measures from Tuesday to address the impact of the unrest.
The demonstrations began in protest against rising living costs, according to Reuters' report on the protests that preceded the market turmoil. Protesters' demands also included objections to deteriorating public services, before parts of the demonstrations turned violent. The interior minister estimated that around 550,000 people took part in the demonstrations, providing an official estimate of participation. The violence also hit public buildings, with Limoges city hall set on fire during the unrest. The burning of the building was among the events that followed demonstrations over living conditions and public services, according to Reuters' account.
Authorities imposed localised curfews in parts of French cities on Monday, according to Reuters. The areas covered included parts of Paris, Lille and Nice, as the government moved to restore order after the unrest. Lecornu said: "My determination to restore order is absolute," reaffirming his stance on tackling the violence. President Emmanuel Macron had acknowledged in his Sunday address that peaceful protesters had legitimate demands. He called for a distinction between those protesters and those seeking to cause destruction, setting out his position on the protesters' demands and the violence that accompanied them.
The developments come as France's public debt-to-GDP ratio rose to 115.7% in 2025, according to the national statistics institute's annual accounts published in May. The ratio stood at 112.6% in 2024 before rising the following year. In its consultations published in July, the International Monetary Fund urged France to adopt credible, growth-supporting fiscal consolidation. It recommended that the consolidation be expenditure-based, as part of its recommendations on the path of French public finances. The fund set a target of reducing the deficit to below 3% of GDP by 2029.
The lower house of parliament was scheduled to vote on the revenue section of the 2027 budget bill on Tuesday, according to Reuters. The next business climate survey will be published on 22 October 2026 at 08:45, according to the schedule announced by France's national statistics institute. Moody's will review France's credit rating next Friday, following the scheduled budget vote and publication of the business survey. Lecornu pledged to deliver "concrete, swift and fully funded responses" to the protesters' demands by late October, according to Reuters. At a later date, French unions called for another round of strikes and rallies on 5 November.