France's 10-year bond yield hits 2008 high as deficit concerns mount

France sold its benchmark 10-year OAT bonds at a yield of 4.23% in the latest monthly auction, the steepest level since the 2008 global financial crisis. The rate jumped from 3.90% in August and from 3.45% in February, when geopolitical tensions were lower.

Rising yields signal investor unease

The climb reflects investors demanding higher compensation for lending to a government whose deficit hit 5.1% of gross domestic product last year, one of the highest ratios in the eurozone. Debt now stands at 117.5% of GDP, a proportion not seen since the end of World War II and well above the 60% ceiling set by the EU's Stability and Growth Pact. In a striking turn, French yields have briefly overtaken those of Greece, a country that required the largest EU bailouts after the 2008 crisis.

Fiscal squeeze on the French government

Energy price spikes and the prospect of further central‑bank rate hikes have added pressure on sovereign yields across the globe. In France, the surge adds urgency to the agenda of Prime Minister Sebastien Lecornu, who is negotiating steep spending cuts for next year’s budget to bring the deficit back within EU limits.

Outlook for the budget and markets

Analysts expect the government to pursue a tighter fiscal stance, which could keep yields elevated in the near term. Investors will watch upcoming budget talks closely, as any sign of a credible plan to rein in debt may stabilise the market, while continued uncertainty could push borrowing costs higher and weigh on the euro.