Rising Long-Term Yields Put France’s Finances Under Pressure

Overview

• This week, long-term government bond yields jumped in major markets with U.S. 10‑ and 30‑year Treasuries and French 10‑year yields reaching multi‑year highs.
• French 10‑year yields and the spread to German bunds widened to levels not seen in years, a move markets say prices in France’s large deficits and heavy pension costs.
• Official audits and data show France spends far more than it collects, pensions cost roughly 14% of GDP, and rising interest costs are set to become the budget’s largest item.
• The French government has proposed austerity steps and plans record bond sales for 2027 while the Banque de France says ECB support is not needed at present.
• Banks and analysts warn the episode reflects a structural reappraisal of sovereign financing driven by fewer long‑term buyers and a smaller ECB balance sheet, which raises contagion risks for the euro area and other indebted countries and could force higher taxes or cuts for households.