French borrowing costs near highest since 2002 as Moody's review of France's rating is due

The yield on France’s 10-year government bond rose above 5% this week for the first time since 2002, and the gap over German 10-year yields exceeded 170 basis points on Thursday 22 October for the first time since the euro zone debt crisis of the early 2010s, CNBC reported. The cost of insuring French government debt against default through credit default swaps was also at its highest since that period, CNBC said.

On Friday 23 October, French 10-year yields were down 5 basis points at 5.04%, but had risen nearly 27 basis points over the week, the most of any major euro zone country, Reuters reported. Moody’s was scheduled to publish a review of France’s credit rating later on Friday, according to Reuters. The euro was down 0.12% at $1.12.

CNBC cited France’s deficit and debt, slowing growth and political instability as the concerns behind the moves. The French government has cut its 2026 growth forecast to 0.5%, CNBC said.

“We are deep into French crisis territory,” said Carsten Brzeski, ING’s global head of macro research. “There is no risk of an imminent liquidity issue for the French government,” he added.

BlackRock strategists said the current environment was “materially different” from the one before the 2011-2012 debt crisis, but that “further volatility and spillovers remain possible”. Alex Everett of Aberdeen Investments said the situation should be treated “primarily as French risk rather than a systemic euro-area risk”.

France will deploy 70,000 police for protests on Saturday, Interior Minister Laurent Nuñez said, according to Reuters.