France borrowing costs hit highest levels since 2012 crisis

French borrowing costs have surged to their highest levels since the 2012 eurozone debt crisis. The spread between French 10-year bond yields and German benchmarks has expanded to over 110 basis points, reflecting increased risk premiums driven by high public debt and political uncertainty ahead of the 2027 presidential election.

The rapid increase in yields has surprised financial institutions; Barclays had previously suggested that exceeding 100 basis points would be an “ugly” scenario for the country. Analysts at Keyridge Asset Management noted that France is “uniquely exposed” due to its combination of high debt, large deficits, and complex central bank policy challenges.

Market participants are actively responding to these fiscal risks. Some investors are shorting French government bond futures (OATs), while others are reducing their exposure to French debt. While the spread could potentially rise to 200 basis points, some analysts suggest such a level might eventually trigger buying due to the attractive yields offered.