France's Debt Crisis Deepens as Foreign Investors Look for the Exit

France's Debt Crisis Deepens as Foreign Investors Look for the Exit

Ten-year yields breach 5% for the first time since 2002

France's benchmark 10-year government bond yield pushed through 5% in intraday trading on October 21, the first time it has done so since July 2002. French public debt stands at 119% of GDP, the highest level since the end of World War II, El País reported. Le Monde noted that Prime Minister Sébastien Lecornu is trying to win parliamentary approval for a budget requiring €43 billion in spending cuts, and that even if it passes, the 2027 deficit would only fall to 5% of GDP — far above the EU's 3% ceiling.

Yields climb for a fourth straight stretch

On October 22 the 10-year yield touched 5.1415% and settled at 5.11%, an 11.5 basis point rise, pushing the premium investors demand over German bunds to a fresh 15-year high, BNN Bloomberg reported. Earlier, on October 19, the 10-year yield rose seven basis points to 4.849%, the two-year rose 2.5 basis points to 3.571% and the 30-year rose three basis points to 5.397%, The Guardian reported.

French borrowing costs now exceed America's

The Guardian reported on October 22 that the 10-year OAT yield rose another nine basis points to 5.089% in early trading, its highest since July 2022, with the gap to German bunds at its widest in nearly 15 years — leaving France's 10-year borrowing costs above the equivalent US Treasury yield. France's budget deficit was 5.1% of GDP in 2025, with the debt pile at 115.6% of GDP.

The debt stock keeps setting records

France's public debt stood at €3.596 trillion ($4.08 trillion) at the end of June, equal to 119% of GDP, according to figures from France's National Institute of Statistics and Economic Studies, Fortune reported on October 1. That ratio was just 97.9% of GDP in 2019, before the pandemic, and projections cited by Fortune see it rising to 122% of GDP.

A Japanese manager empties its French position

Bloomberg reported that Sumitomo Mitsui DS Asset Management's global fixed income funds sold their entire holdings of French government bonds, shifting the money into German bunds and short-term Japanese government notes. Eurasia Business News, citing ABN AMRO data, put Japanese investors' share of French sovereign debt at about 5.2% in 2025, while a Bloomberg estimate put their holdings at roughly ¥23 trillion, or about $145 billion, as of July 2026.

Foreign ownership keeps climbing

Overseas investors' share of French debt has risen from around 48% at the start of 2022 to nearly 60% at the start of 2026, CNBC reported, a shift that can amplify volatility in the bond market whenever investors turn risk-averse. That day the French 10-year yield jumped seven basis points, with the two-year up two basis points and the 30-year up six.

Default insurance now the priciest in Europe

France's five-year sovereign credit default swap rose to 81 basis points, with Macquarie Group strategist Thierry Wizman saying the cost of insuring against a French default was now the highest among the major EU countries and the UK, Fortune reported on October 2. Ales Koutny, head of international rates at Vanguard, called France a "long-term degrading credit." The same report noted France's economy is projected to grow just 0.5% this year, with the government planning to issue over $380 billion of medium- and long-term debt next year.

Street unrest compounds the budget deadlock

Writing in the New York Times, Mujtaba Rahman, managing director for Europe at Eurasia Group, said France is suffering a crisis of liberal democracy, fiscal mismanagement and youth disaffection, and that "France, truly, is on the brink." If the government fails to pass its budget, he warned, the cost of servicing French debt may explode and France could be forced to seek assistance from the IMF and pray for support from the ECB, Fortune reported on October 17.

Stocks and the euro take the same hit

French government bonds underperformed their European peers on October 19, with the spread to the German 10-year widening eight basis points to 146 basis points, the widest in two weeks, and the gap to Italian yields reaching a fresh record, Bloomberg reported. The euro weakened and the CAC 40 fell 1.2%.

A record issuance slate for 2027

France's debt agency, Agence France Trésor, plans to sell a net €340 billion of medium- and long-term bonds next year, about 10% more than this year, to fund the deficit and refinance maturing debt, Bloomberg reported.

A €43 billion cut package awaits the budget vote

Le Monde pointed out that Lecornu is trying to secure a budget requiring €43 billion in cuts without a parliamentary majority. Al Jazeera noted that France's deficit is expected to reach 5.4% of GDP in 2026, against an EU average of just over 3%, while El País cited Fitch's warning that French debt could reach 128% of GDP by 2030.