French bond yields hit 18-year high as global sell-off deepens

France's 10-year government bond yield surged past 4.3% this week and reached 4.45% by September 11, a level not seen since the 2008 financial crisis, as a punishing global bond sell-off pushes borrowing costs across major economies to multi-decade highs. The rise adds pressure to a French government already grappling with slowing growth and a widening budget deficit, while across the Atlantic, U.S. Treasury Secretary Scott Bessent's attempt to tame long-term yields through expanded bond buybacks fell flat.tradingeconomics+1

A Mounting Bill for France

On September 9, the French 10-year OAT yield stood at 4.31%, up sharply from roughly 3.6% in June and 3.9% a month earlier. At an early September auction, the Agence France Trésor had to offer a 4.23% yield, up from 3.73% in July. The 30-year French bond crossed 5%, and the spread between French and German 10-year yields approached 90 basis points, a measure of the extra risk premium investors demand for holding French debt.cointribune

The French government has cut its 2026 growth forecast from 0.7% to 0.5% and acknowledged it will miss its target of reducing the public deficit to 5% of GDP. The debt servicing burden is now expected to reach roughly 65 billion euros this year, exceeding initial projections by 4.5 billion euros and becoming the state's single largest expenditure. Kevin Thozet of Carmignac's investment committee said "France is particularly exposed to the rise in rates," estimating that returning to a 3% GDP deficit by 2029 could require nearly 85 billion euros of fiscal adjustment.cointribune

Global Pressure, Local Vulnerability

France is not alone. A Reuters Thomson Reuters Corporation ↗ 0.10% analysis noted that government borrowing costs from the United States to Germany and Japan are at or near multi-decade peaks, driven by inflation fears, surging government debt issuance, and rising oil prices. German 10-year Bund yields have reached their highest level since 2011, while British yields hit levels last seen in mid-2007. The New York Times reported that a flood of borrowing by the world's richest nations, expanding deficits, and persistent inflation are prompting investors to demand higher returns.reuters+1

In the United States, the Treasury Department's expanded buyback operation on Thursday — purchasing $5.2 billion in longer-term bonds, below its announced $6 billion cap — failed to stem the tide. The 10-year Treasury yield climbed to 4.94%, and the 30-year yield hit 5.36%, its highest since 2004, according to the Wall Street Journal News Corp ↗ 1.64%. Bloomberg reported that Bessent dismissed concerns afterward, calling the Treasury market "very good shape". Oil prices topping $107 a barrel for Brent crude added to inflation fears and fueled further selling.treasury+2

The Doom Loop Risk

The dynamic now facing heavily indebted nations amounts to what the Financial Times Pearson plc ↗ 0.35% has described as a potential "doom loop," in which rising interest costs on past debt create more debt, causing investors to demand still higher yields. OECD nations are expected to borrow a further $18 trillion this year, an all-time high. France continues to find buyers for its bonds and does not face an inability to finance itself, but the cost of each debt renewal is climbing. Upcoming budgetary choices will need to reassure investors to prevent further widening of the risk premium.wsws+1