French 30-Year Government Bond Yield Rises to Post-Crisis High, Reaches New High Since Global Financial Crisis
The yield on French 30-year government bonds has risen to 4.76%, reaching a new high since the global financial crisis, with a single-day increase of 5 basis points.
This yield is approximately 61 basis points higher than a year ago, reflecting investors' demand for higher risk compensation for holding long-term French sovereign debt.
French government debt is expected to rise from 115.6% of GDP in 2025 to 118.1% in 2026, and exceed 120% in 2027; the fiscal deficit is expected to remain at 5.1% of GDP in 2026.
Interest expenses are becoming an accelerator of fiscal deterioration. The European Commission expects that France's general government interest expenses will rise from 2.2% of GDP in 2025 to 2.6% in 2026, primarily due to increased bond issuance rates and rising costs of inflation-linked bonds.
The rise in long-term yields does not solely reflect the European Central Bank's short-term rates. Political deadlock in France, difficulties in budget reform, declining credibility in deficit reduction, and a continuously increasing supply of government bonds have collectively raised the long-term term premium.
In market mechanics, the French government is the supplier of new bonds, while banks, insurance companies, pension funds, and international investors are the buyers; when investors are concerned about the fiscal trajectory, they demand higher yields to lock in 30-year funds. High yields attract long-term buyers but increase France's refinancing costs, benefiting new bond investors while putting pressure on French finances, taxpayers, and assets that rely on low-risk interest rate valuations.
Source: Public Information
ABAB AI Insight
The repricing of French long-term bonds began after the end of the global zero interest rate era in 2022, but domestic political instability since 2024 has widened the credit spread of France relative to Germany. After the early parliamentary elections in 2024, the lack of stable majority support for budget proposals, fiscal tightening, and structural reforms has led the market to convert political fragmentation into a risk premium for sovereign bonds.
In terms of capital pathways, France's fiscal model relies on the continuous issuance of medium- to long-term bonds to refinance existing debt and deficits. A debt ratio of 120% does not necessarily trigger a crisis; the key is whether nominal economic growth can cover the average financing cost; however, when new bond yields approach 5% and the deficit remains above 5%, the new interest will crowd out spending on public services, defense, industrial subsidies, and social welfare.
Historically, during the European debt crisis from 2010 to 2012, France was seen as a core low-risk issuer outside Germany; now, the 30-year yield has returned to levels around 2011, but the crisis dynamics are different. There is currently no panic over the disintegration of the euro; what is being repriced by the market is the long-term fiscal sustainability, reform capacity, and policy execution ability of the second-largest economy in the EU.
This represents a transfer of pricing power. During the European Central Bank's large-scale bond purchasing period, the pricing power of long-term government bonds was mainly held by the central bank's balance sheet; after quantitative tightening and normalization of policy rates, the pricing power has returned to private bond investors. Investors are no longer only concerned about whether France will default, but are comparing its 30-year capital occupation, inflation uncertainty, political risk, and relative returns with other sovereign debts, thus demanding a higher term premium.
ABAB News · Law of Cognition
Deficits are not scary; what is scary is when financing costs exceed growth.
Political deadlock does not immediately lead to default, but it will immediately increase costs.
Rising long-term bond yields mean that future finances are being sold off.