French 10-Year Bond Yields Match Greek Counterparts Amid Political Turmoil
Yields on 10-year French bonds are now trading at levels comparable to Greek bonds, highlighting concerns over France’s political instability and fiscal health.
On Tuesday, French bond yields stood at 2.90%, nearly identical to the 2.92% yield on Greek bonds with the same maturity, according to FactSet data. This development echoes broader anxieties about government debt in the global market.
The bond market’s unease is fueled by the looming no-confidence vote against French Prime Minister Michel Barnier’s three-month-old government, scheduled for Wednesday. Barnier’s administration emerged after President Emmanuel Macron’s snap elections, which aimed to check Marine Le Pen’s far-right National Rally party.
However, the new government faces mounting challenges, including stabilizing France’s sovereign debt-to-GDP ratio, currently around 112%.
Bond investors, often referred to as “vigilantes,” have zeroed in on France due to its substantial overseas debt ownership. About 40% of French government debt is held by international investors, a significant proportion that amplifies market sensitivity.
Robin Marshall, director of global investment research at FTSE Russell, remarked that “foreign holdings are often quite volatile,” making France particularly vulnerable to external pressures.
This situation contrasts with other recent bond market disruptions, such as the U.K.’s 2022 gilt yield spike following Liz Truss’s proposed minibudget, and the rise in U.S. bond yields ahead of Donald Trump’s return to the presidency, driven by fears of policies that could expand U.S. debt. In France’s case, the strain stems from political gridlock and austerity measures rather than debt expansion.
The European Commission has criticized France for excessive debt, and Barnier’s proposed 2025 budget—focused on tax hikes and spending cuts—has done little to assuage concerns.
Thierry Wizman and Gareth Berry of Macquarie note that the current political uncertainty casts doubt on France’s ability to stabilize its debt trajectory, which is critical to restoring investor confidence.
As the no-confidence vote approaches, the French bond market’s reaction underscores the enduring power of global bond vigilantes. These investors remain a key force in holding governments accountable for fiscal discipline, whether in France, the U.S., or beyond.
