The French risk premium expands to 153 basis points, its highest level since early October. The French ten-year bond hovers around 5%.
The risk premium of France, measured as the differential against the German ten-year bond, reached 153 basis points this Tuesday, according to Expansión. It is the largest gap since early October, although it had reached 160 basis points two weeks ago.
The yield on French debt maturing in ten years is around 5%, in the 2007 peak zone. The movement reflects concerns about the sustainability of the country's public accounts.
The agency Moody's will review France's credit rating this Friday, currently at Aa3 with a negative outlook. The analysis comes in a tense climate following disturbances over the weekend in several cities.
The French economy is stagnant. It grew by 0.7% year-on-year in the first quarter and 0.5% in the second. The Government and the Bank of France forecast 0.4% for the whole of 2026.
The expected deficit for this fiscal year is 5.4% of GDP, above the 3% limit set by Brussels. The debt is approaching 120% of GDP.
Benjamin Schroeder, senior interest rate strategist at ING Research, points out that protests increase fears that any future government will struggle to implement necessary reforms. According to him, the European Central Bank has limited room because energy continues to pressure inflation:
"it has its hands tied"
The expert adds that parties are more focused on positioning themselves for elections than addressing the fiscal problem, at a time when the budget for next year is being debated.
From Morningstar DBRS, its senior vice president and director of Global Sovereign Ratings, Mehdi Fadli, believes that the direct fiscal impact of the protests is manageable. The greater risk, according to the agency, is that social tensions hinder the approval of a budget for 2027 in line with fiscal targets:
"increase the risk that France fails to correct its fiscal imbalances"
The agency warns that these pressures could keep the cost of French sovereign debt high and complicate fiscal consolidation ahead of the presidential elections in 2027.
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