France experienced renewed selling in government bonds and stocks on Monday after violent weekend protests left public buildings burned and hundreds of shops looted. France's 10-year government bond yield rose seven basis points to 4.849%. Bond yields rise when bond prices fall. The increase widened the difference between France's and Germany's 10-year borrowing costs, a measure of the risk premium attached to France's debt.
France's two-year government bond yield rose 2.5 basis points to 3.571%. France's 30-year borrowing cost, a benchmark for the government's long-term borrowing, rose three basis points to 5.397%. The Cac 40, which tracks the biggest companies listed in Paris, fell 1% at the start of trading. The pan-European Stoxx Europe 600 index fell 0.4%. The euro fell 0.13% against the US dollar in early trading on Monday to $1.122.
The interior ministry said on Sunday that almost 2,400 people had been arrested across France. Police deployed teargas during confrontations with protesters. President Emmanuel Macron condemned the "unbridled violence" in a televised address on Sunday night. Macron questioned how French people could inflict such damage on France.
Violence erupted across the country after weeks of peaceful demonstrations over conditions in schools and the cost of living. Tens of thousands of people attended peaceful marches demanding more teachers and repairs to decrepit schools. Different groups clashed with police in cities including Paris, Bordeaux, Nice and Marseille.
Deutsche Bank's Jim Reid said the protests would make the international community less comfortable buying France's government bonds. Reid said France already faced difficult fiscal conditions. Reid said the weekend added political risk for markets as the 2027 election approached.
Higher borrowing costs will further strain France's public finances as the government tries to pass a budget for next year to reduce the deficit. France's debt-to-GDP ratio stood at 1115.6% in 2025. France's budget deficit was 5.1%, compared with 4.3% for the UK. The UK's debt-to-GDP ratio was 94.3%.
France's government is preparing a budget that would cut pensions spending and funding for government departments, excluding defence. However, growing fears that political pressure could derail the spending cuts raise the risk of additional borrowing and debt.
France Debt Sell-Off Worsens Amid Protests, Bond Yields Rise
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Summary
France's bond sell-off intensified Monday as protests continued, pushing 10-year yields up to 4.849% and widening the risk-to-reward ratio against Germany. The Cac 40 dropped 1% at open, with the euro falling 0.13% against the dollar. Nearly 2,400 arrests were reported, and Macron warned of long-term damage. Deutsche Bank’s Jim Reid noted political risks could deter bond buyers, especially with support and resistance levels shifting ahead of 2027. A budget plan targeting pensions and local funding faces strong opposition, raising borrowing concerns.
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