French borrowing costs overtake US amid budget turmoil

France's borrowing costs rose sharply on Thursday as investors reacted to renewed political and fiscal turmoil, pushing the country's 10-year bond yield above the equivalent US Treasury yield for the first time since 2013. The move came as France's bond market faced another round of selling and the gap between French and German 10-year borrowing costs widened to its highest level in almost 15 years. The French 10-year yield climbed to 5.089% in early trading, its highest level since July 2022.

The latest rise followed a week of market concern over the government's ability to pass next year's budget. Investors have also been watching the fallout from protests that turned violent over the weekend, with clashes reported in Paris, Bordeaux, Nice and Marseille. According to the interior ministry, there had been nearly 2,400 arrests.

Public buildings were attacked and thousands of shops and businesses were looted, adding to the sense of instability around the political and fiscal outlook. The pressure on French debt reflects a wider concern about the country's public finances and the difficulty of pushing through spending restraint. France's budget deficit stood at 5.1% of gross domestic product in 2025, while public debt reached 115.6% of GDP.

Parliamentary gridlock has also blocked Emmanuel Macron's plans to raise the state pension age from 62 to 64, along with other measures intended to reduce state spending. That combination of political deadlock and fiscal strain has made French government bonds more vulnerable to selling. The market reaction matters because sovereign borrowing costs are a key measure of investor confidence and can affect the government's room for manoeuvre.

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A sustained rise in yields can make it more expensive for the state to finance itself, especially when debt levels are already high. The fact that French borrowing costs have moved above US Treasury equivalents is notable because US government debt is usually treated as a global benchmark for safety and liquidity. The move also suggests that investors are demanding a higher premium to hold French debt than they were earlier in the year.

The sell-off has not been confined entirely to France. A market strategist at Deutsche Bank said the move was beginning to ripple into other countries, with Italian and Spanish spreads also widening against German bonds. That points to broader sensitivity in eurozone debt markets when investors reassess fiscal risks in one of the bloc's largest economies.

France's position is particularly important because of its size, its role in the eurozone and the political difficulty of securing agreement on budget measures. What happens next will depend on whether the government can restore confidence in its budget plans and calm political tensions after the protests. It remains unclear how quickly the bond market will stabilise, or whether further selling will push borrowing costs even higher.

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