French 10 Year Bond Yield Tops 5% for the First Time Since 2002

France’s 10 year government bond briefly rose above 5% today, a level not seen since 2002. The move came shortly before 11:30 a.m. in Paris. Later in the session the yield eased to around 4.93%, still about 6 basis points higher on the day. Investors are reacting to a mix of political turmoil, heavy public debt and a wide deficit.

Budget Fight Adds to Market Pressure

Lawmakers are negotiating the 2027 budget, and Prime Minister Sebastien Lecornu is aiming for 54 billion euros in spending cuts. France is under the EU’s excessive deficit procedure, which asks Paris to bring its deficit closer to 3% of GDP, down from 5.1% at the end of last year. Markets worry that a divided parliament will struggle to agree on the savings needed.

Protests Complicate the Fiscal Picture

The unrest began last month as a Paris student movement and turned increasingly violent, ending in rioting and looting over the weekend. CNBC reported, Officials estimate the damage at hundreds of millions of euros. Protesters are demanding more investment in education and relief from the cost of living.

Bond traders are also watching next spring’s presidential election.