France's Borrowing Costs Reach 5%, a 24-Year High, as Budget Stalls
The yield on France's 10-year government bond touched 5% on Wednesday, October 21, 2026, its highest level in 24 years, Reuters reported. The yield is the interest rate investors demand to lend to a government for a decade, and a rising yield means the government pays more to borrow. Reuters put the yield at 5.002% at 0914 GMT. In morning trading it had risen more than 8 basis points, a basis point being a hundredth of a percentage point, before easing to 4.99%, according to the Guardian.
The move comes as the French government has not yet passed its budget for next year. The country's budget deficit, the gap between what the state spends and what it collects, was 5.1% of economic output in 2025, and its debt stood at 115.6% of gross domestic product, the total size of the economy. Both figures were reported by the Guardian.
Political arithmetic is part of the picture. No single party has held overall control of the French parliament since President Emmanuel Macron called a snap election in 2024, and that gridlock has blocked his plan to raise the pension age from 62 to 64.
Protests have added to the strain. Demonstrations that began in September with students demanding funds for schools described as mouldy and rat-infested, along with teacher shortages and large class sizes, widened into cost-of-living protests. Some of those demonstrations turned violent, with riots and looting, and protesters set fire to the town hall in Limoges.
Investors have responded unevenly. Some international lenders, notably Japanese fund managers, have pulled back from lending to France, and the lenders still active are demanding higher prices, particularly for longer-term loans. Reuters reported that the premium France pays over Germany, measured against German government bonds known as Bunds, was edging back toward early October's 15-year high of nearly 160 basis points. French yields had risen about 80 basis points since the start of September, Reuters reported on October 8.
The government unveiled a plan on October 1 to sharply narrow the deficit by restraining spending and raising tax revenue, according to Bloomberg. On October 8, euro zone finance ministers told France to pass its 2027 budget to calm markets. Yields had already reached 4.96% around October 1, the highest since 2002, the Guardian reported.
Warnings have been building for some time. In December 2025, Banque de France governor Villeroy said France could face a market backlash if its public finances plans failed to bring the 2026 deficit within 5% of economic output, Bloomberg reported. In an opinion column dated October 20, Bloomberg argued that if borrowing costs stayed at this level, the interest rate France pays would soon exceed the economy's growth rate.
