The Political Situation in France

French Yields Top 5 Percent – ​​First Time Since 2002

The yield on French ten-year government bonds briefly climbed above 5 percent on Wednesday, according to several media outlets. The unrest and the failure to finalize a budget have contributed to this development.

Rising yields indicate that investors are concerned about France’s economy and are demanding higher interest payments in exchange for lending to the country. The unrest has fueled this trend, as people protest against low living standards—a situation that will make it even more difficult for politicians to tighten the economy, which is currently running large deficits.

The yield on French ten-year government bonds has risen from just over 3.6 percent at the start of the year to levels just under 5 percent.

Expert: A French Budget May Not Calm the Markets

Even if France manages to pass a budget through parliament, the anxiety surrounding the country’s bond market is likely to persist, according to Pooja Kumra, a strategist at TD Bank, speaking to Bloomberg.

"Even if the budget passes, investors remain concerned about broader signs of a lack of control over public finances and political fragmentation," she told the news agency.

On Wednesday, the yield on the ten-year French government bond rose above 5 percent for the first time since 2002—a sign that the market is worried about the state of the country’s public finances. Meanwhile, the additional yield that investors demand for lending to France, compared to Germany, has reached its highest level in 15 years.