In the France debt crisis, bonds are pricing where French public finances are heading, not the country’s credit rating. On October 29, 2026, the 10-year French government bond (OAT) yielded 4.88%, or 152 basis points (bp) more than Germany’s 10-year Bund. That premium is wider than Italy’s (113bp, rated BBB+ by S&P) and Greece’s (94bp, rated BBB), and 2.5 times Spain’s (61bp), which S&P rates A+, the same as France. Moody’s still rates France Aa3. Investors are looking past the letter grade to a deficit stuck at around 5% of GDP, debt heading for about 122% of GDP, an interest bill set to reach about €91 billion in 2027, and a parliament without a majority to pass a budget.
For most of the euro’s first decade, France borrowed almost as cheaply as Germany: from 2000 to 2007 its 10-year spread over Bunds averaged just 7bp. On October 21, 2026, the 10-year OAT yield closed at 5.01%, the first close above 5% since July 2002. The next day it closed at 5.08% and the spread hit 174bp, the widest since November 2011, at the height of the euro crisis. At the close on October 22 and 23, France even paid more than the United States to borrow for 10 years.
The cleanest gauge of how markets see France is the spread: the extra yield investors demand to hold a French bond instead of the German bond of the same maturity. Germany is the euro area’s benchmark borrower, so the gap strips out the European Central Bank’s interest rates and isolates what is specific to France. (Our guide explains what a bond spread is in more detail.)
Yield on the 10-year French government bond (OAT) minus the 10-year German Bund, daily closes, January 2000 to October 29, 2026. Source: daily closing yields on 10-year government benchmarks; Bondfish analysis.
The spread started 2026 at 71bp and fell to a low of 55bp on February 25. It then more than tripled in eight months, with most of the move after the summer: it ended September at 127bp and peaked at 174bp on October 22. It closed at 152bp on October 29.
The pressure has been building since June 2024, when President Emmanuel Macron dissolved the National Assembly and called a snap election. The spread jumped from 48bp to 77bp within a week. The vote produced a parliament split into three blocs with no majority, and France has struggled to pass a budget ever since. The 2026 budget was only adopted on February 2, 2026, using Article 49.3 of the constitution, which lets the government pass a bill without a vote unless it loses a no-confidence motion.
France’s three main ratings still sit in the upper half of the investment-grade scale: Aa3 at Moody’s (the equivalent of AA-, with a negative outlook since October 2025) and A+ at S&P Global Ratings and Fitch, which both cut France by one notch in autumn 2025. On S&P’s scale, A+ is three notches above Italy’s BBB+ and four above Greece’s BBB. Bond markets are paying no attention to that ranking.
Yield on each country’s 10-year government bond minus the 10-year German Bund at the October 29, 2026 close; S&P long-term rating in brackets. Source: daily closing yields on 10-year government benchmarks; S&P Global Ratings; Bondfish analysis.
A credit rating and a bond spread answer different questions. A rating is a judgment about the risk of default over many years. A spread is a price set every day by investors who can sell tomorrow. In France’s case, five things separate the two.
Yield on 10-year French, Italian and Spanish government bonds minus the 10-year German Bund, daily closes, January 2, 2025 to October 29, 2026. Source: daily closing yields on 10-year government benchmarks; Bondfish analysis.
The government’s own figures explain why investors want more yield. The deficit, which fell to 5.1% of GDP in 2025, is now expected at 5.4% this year. The 2027 budget bill, presented to the cabinet on October 1, targets 5.0% and still has debt rising to 121.7% of GDP.
| Year | Deficit | Debt | Interest bill |
|---|---|---|---|
| 2024 | 5.8% | 112.6% | €58.1bn |
| 2025 | 5.1% | 115.6% | €64.7bn |
| 2026 (forecast) | 5.4% | 119.3% | about €79bn |
| 2027 (budget bill) | 5.0% | 121.7% | about €91bn |
France’s public finances, general government. Deficit and debt in % of GDP; interest bill = general government interest payments. 2024 and 2025: INSEE. 2026 and 2027: government forecasts in the 2027 budget bill (interest as reviewed by the High Council of Public Finances).
The sell-off has not been limited to 10-year bonds. French yields have risen across the curve, and the gap with Germany has widened at every maturity, even at two years.
| Maturity | France yield | Germany yield | Spread now | Spread 25 Feb |
|---|---|---|---|---|
| 2-year | 3.64% | 3.08% | 57 | 12 |
| 5-year | 4.28% | 3.16% | 112 | 28 |
| 10-year | 4.88% | 3.35% | 152 | 55 |
| 30-year | 5.37% | 3.68% | 168 | 84 |
French and German government bond yields at the October 29, 2026 close, and France’s spread over Germany in basis points, then and on February 25, 2026 (the 2026 low for the 10-year spread).
For anyone who bought French government bonds earlier this year, the cost is real. A 10-year OAT bought at par on February 25, when the 10-year yield was 3.26%, would now be worth about 88 per 100 of face value. Counting the interest earned since then, that is a loss of about 10%. A 30-year OAT bought the same day at 4.21% would be down about 14%.
A new 10-year OAT bought at today’s yield has a modified duration of about 7.8. Put simply, its price would fall by roughly 7.8% for every further 1 percentage point rise in yield, and rise by about as much if yields fell back.
Four points are worth keeping in mind:
France’s ratings describe a rich country with strong institutions that can pay its debts. Its bond yields describe a country whose debt keeps rising, whose budget has no majority behind it and whose central bank backstop comes with strings attached. At 152bp over Bunds, more than Italy or Greece pays, the market has effectively priced France as a weaker credit than its Aa3 and A+ ratings imply. Whether that gap closes depends on the budget votes in November and December and on the 2027 election, not on the agencies. For bondholders, the risk today is price swings, not default.
Government bond yields: daily closing yields on generic 2-, 5-, 10- and 30-year government benchmarks for France, Germany, Italy, Spain, Belgium, Greece, Portugal, Finland, Austria, Ireland and the Netherlands, January 2000 to October 29, 2026; U.S. 10-year Treasury closing yields for October 2026. Spreads, the price and return of the hypothetical OATs bought on February 25, 2026 (annual coupon equal to that day’s yield) and modified duration are Bondfish’s own calculation. Credit ratings: S&P Global Ratings, Moody’s and Fitch Ratings as of October 29, 2026. Public finances: INSEE (2024–2025 and June 2026) and the government’s 2027 budget bill (2026–2027). Debt structure and financing: Agence France Trésor (2027 financing programme) and Banque de France. Holdings and flows: ECB securities holdings statistics and euro-area balance of payments. Fiscal path: EU excessive deficit procedure for France.
This article is for general information only and is not investment advice. Investing involves risk, including possible loss of principal. Bond prices fall when yields rise, and past market moves do not predict future ones. Consider consulting a licensed financial professional before making investment decisions.
