Unrest in France reaches the markets: the French ten-year bond exceeds 4.8% and its risk premium surpasses 140 basis points. European stock markets are also falling.
The disturbances this weekend in France have spilled over into the debt markets. According to El Correo, the yield on the French ten-year bond rose by ten basis points on Monday, surpassing 4.8%, due to massive sell-offs by investors concerned about the violence of the protests.
The French risk premium, that is, the extra cost demanded by investors compared to the German bond, exceeded 140 basis points. This figure more than doubles the Spanish premium of 62 points and surpasses the Italian one of 114. There were also protests and looting in Milan over the weekend.
By midday, the Paris stock market was down 1.5%. The Ibex-35 fell 1.65%, the German DAX dropped 1.35%, and the Milan stock market was down more than 1.7%.
The rising cost of debt forces the French State to pay higher interest rates to finance itself and refinance its maturities. If the pressure continues, part of the budget would go to interest at the expense of public services, investment, or aid, or it would increase pressure to raise taxes or contain spending.
The adjustments coincide with the budget debate for 2027 at the Élysée, which includes measures worth 43 billion euros to reduce the deficit. Debt is nearing 120% of GDP, a level not seen since 1946, and the projected growth for 2026 has been halved to 0.4%.
Erick Muller, head of Market Strategy and Products at Muzinich, points out the lack of responses:
The markets are wondering what the response is to this deterioration, and for now, they are not finding any satisfactory one.
Muller anticipates volatility as long as the political situation remains uncertain and does not see a resolution in the short term.
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