French bond yield hits 5%, highest since 2002
Key Facts
The yield on French 10-year government bonds reached 5%, its highest since 2002, according to Reuters' coverage of the session. The threshold was reached during a week in which French yields rose more than 20 basis points amid a bond selloff. The agency linked the fiscal pressures to difficulties passing a budget under a weak French government seeking to reduce the deficit. Reuters said the government was "struggling to pass a budget and reduce a large deficit," placing the fiscal challenge at the heart of the rise in borrowing costs. These pressures coincided with the approach of Moody's review of France's credit rating, scheduled for Friday, according to Investing.com.
The difficulty of reducing the deficit follows a year in which France's fiscal deficit narrowed as a share of gross domestic product, according to preliminary results released by the National Institute of Statistics and Economic Studies. The general government deficit stood at 152.5 billion euros in 2025, equivalent to 5.1% of GDP. The ratio was 5.8% in 2024, according to the institute, with the accounts showing a decline in the deficit ratio between the 2 years. By contrast, the institute's 2025 accounts showed the public debt ratio rising to 115.7% of GDP. That compared with 112.6% in 2024, pairing a decline in the annual deficit ratio with an increase in the public debt ratio over the same period.
In the bond market, the spread between French and German 10-year government bonds widened to 157 basis points, according to Investing.com. The spread reached that level ahead of Moody's review as the French government struggled to pass its fiscal plan. Against the backdrop of sovereign pressures, Simon Ainsworth, a banking analyst at Moody's, warned of spillovers to the banking sector, according to Reuters. Ainsworth said banks "start from a stronger position, but they are not immune." His warning came in the agency's coverage of the bond selloff and renewed debate over the link between banks and pressures on sovereign debt in the euro zone.
On economic activity, France's overall business climate indicator stood at 96 points in September 2026, according to the National Institute of Statistics and Economic Studies. The overall indicator fell one point from the previous month, while the manufacturing survey showed no monthly change. France's manufacturing business climate indicator stood at 101 points in September 2026, unchanged from the previous month, according to the institute. In services, the business climate indicator fell to 97.9 points in September from 99.1 points in August 2026. The decline in the overall indicator thus coincided with a lower services reading, while the manufacturing indicator held steady during the same month.
In currency markets, the U.S. dollar index edged up 0.1%, according to Investing.com's coverage of the session. The move took the index to 101.79 points after the U.S. currency fell in the previous session. The index had lost 0.3% in that session, according to the website, before posting its modest gain. The dollar remained close to a 3-week low despite the index's rise during the session. The website described the move as a stabilization after the earlier decline, while the U.S. currency continued to trade near the low for the comparison period.
The National Institute of Statistics and Economic Studies' calendar sets October 22, 2026, as the next release date for France's overall business climate indicator. The institute will publish its October 2026 services survey on the same day, according to its announced release schedule. The institute set 08:45 as the publication time for the services survey, following a September reading that showed a decline from August. Moody's review of France's credit rating follows on Friday, with the French-German yield spread at the level recorded ahead of the review. In the United States, the Federal Reserve's official calendar sets October 27 and 28, 2026, as the dates of the next Federal Open Market Committee meeting.