France’s sovereign risk premium keeps climbing. The 10-year OAT-Bund spread reached 149.17 basis points on Friday, per LSEG — the highest since 2012 and up from around 84 basis points in early September. The 10-year OAT yield fell only 1.0bp to 4.908 percent on Friday while Bunds rallied 8.2bp to 3.451 percent as investors fled to safety; a Monday note put the 10Y at 4.92 percent, its highest since July 2002, and the spread at 152bp.
The €43 billion 2027 budget unveiled October 1 — savings built on freezing public-sector wages and pensions — did not land. “A clear indication that the budget details announced in parliament did not go down well with investors,” MUFG’s Derek Halpenny wrote. France’s spread is now wider than Italy’s and Greece’s, and 5-year French CDS hit 81bp, their highest in several years.
The mechanics are unforgiving. Public debt stands near €3.6 trillion, roughly 122 percent of GDP, with annual interest costs approaching €91 billion. Paris is refinancing sub-1 percent legacy coupons near 4.9 percent, with roughly €340 billion in gross issuance planned for next year. Every extra basis point costs the state about €31 million a year in interest. And the budget that is supposed to fix this must still survive a parliament that has ousted prime ministers over cuts twice in two years — while 400 to 500 schools closed Monday over protests and the April 2027 presidential election looms.