France 10-year bond yields hit 18-year high of 4.5%

French 10-year government bond yields (OAT) have surpassed 4.5%, reaching their highest level in over 18 years. This surge is driven by a combination of global monetary normalization, rising energy-related inflation, and increasing investor caution regarding France's domestic fiscal situation.

As the French government prepares its 2027 budget, the spread between French and German 10-year bonds (OAT-Bund) has risen toward the 100 basis point threshold. This widening gap indicates growing investor concern regarding French sovereign debt compared to German debt.

The rise in French rates mirrors a broader international trend of tightening financial conditions, with 10-year yields in the United States hovering around 4.8%. Domestically, the combination of high interest rates and weak economic growth is limiting the government's ability to stimulate the economy.