Overview
- Last week French 10‑year yields jumped to multi‑decade highs and the gap over German 10‑year Bunds widened to roughly 150–160 basis points, reflecting a rapid reassessment of France’s sovereign risk.
- Paris has proposed deep spending cuts and tax increases to narrow the deficit, but investors doubt those measures will pass a divided parliament or survive growing student protests that entered a third week.
- International figures including the IMF chief and senior bank and asset‑management executives publicly urged decisive fiscal fixes, saying small changes will not restore confidence.
- The European Central Bank has so far declined to use special tools to cap spreads, and markets have moved money into German and other low‑debt sovereign bonds while trimming expectations for further ECB rate hikes.
- France faces heavy refinancing needs, a 119% debt‑to‑GDP ratio and a record bond issuance plan for 2027, so the key near‑term risks to watch are whether the budget is passed, Q4 credit‑rating reviews and any further widening of the OAT‑Bund spread.