MediumIV Macro Policy & Sovereign Debt28 September 2026, Monday
French ten-year borrowing costs reach their highest level since 2008
France's 10-year yield rose to 4.78% on 28 September, its highest level since July 2008. The OAT–Bund spread had reached a one-year high of 109.9 basis points on 24 September.
According to Trading Economics data for 28 September, the French 10-year bond yield rose 0.05 points to 4.78%, the highest level since July 2008. The yield is up 0.60 points over the month and 1.24 points over the year. The source attributed the rise to inflation concerns fuelled by energy prices and to markets pricing roughly 100 basis points of ECB hikes by the end of 2027. On the fiscal side, Trading Economics wrote that emergency spending linked to the Iran–US conflict is expected to lift the budget deficit from 5.1% of GDP in 2025 to 5.4% this year. A fragmented parliament ahead of the 2027 elections makes fiscal discipline harder.
According to Idéal Investisseur, the OAT–Bund spread, the gap between French and German 10-year yields, hit a 12-month high of 109.9 basis points on 24 September. The spread narrowed by 4.5 basis points to 105.4 on 25 September, against a 12-month average of 74.1 basis points. Trading Economics data for 28 September show France at 4.78% and Germany at 3.63%, implying a gap of about 115 basis points. However, the two data providers may use different measurement times and bonds, so the figures cannot be compared directly. The 28 September spread could not be verified.
Talay assessment
Bottom line
France's borrowing costs are being driven both by the eurozone-wide rise in rates and by a country-specific fiscal risk. The spread staying well above its one-year average shows markets pricing France not as a near-peer of Germany but as an intermediate issuer. Budget negotiations and the pace of ECB hikes will set the direction of the spread in the coming weeks.
Likely effects
- French budgetNegative1–6 months
Rising interest costs are becoming an additional item that widens the budget deficit, making deficit targets harder to meet.
- Eurozone riskNegative1–6 months
A wider spread could spill over into bonds of peripheral countries and narrow the ECB's room to tighten.
- TürkiyeNegative1–6 months
A higher risk premium in Europe could reduce European demand for emerging-market bonds.
Possibilities, ranked
- 1Wide spread becomes entrenched55%
The spread stays well above its one-year average and the yield hovers near its highest level since 2008.
Watch: OAT–Bund spread and the French budget calendar
- 2Partial relief30%
The draft budget convinces markets and the spread narrows towards its one-year average.
Watch: France's 2027 draft budget
- 3Political crisis15%
The budget fails to pass or the government falls, and the spread hits a new high.
Watch: Confidence vote in the National Assembly
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- France 10Y, 28 September▲ 4.78%
- OAT–Bund, 25 September▲ 105.4 bp