French 10-year yield set for biggest quarterly jump since 1987

France’s benchmark 10-year government bond yield was set for its biggest quarterly jump in nearly four decades and its largest monthly rise in almost four years, underscoring September’s global bond selloff, Reuters reported from London on 30 September.

Record quarterly move

The 10-year OAT yield was last at 4.78%, down 3 basis points on the day and just shy of Tuesday’s 18-year high. It has risen 61 bps in September — the biggest monthly increase since late 2022 — and 113 bps since the start of July, the largest quarterly jump since 1987, Reuters said. The spread between French and German 10-year borrowing costs was last about 120 bps, its highest since 2012.

Germany’s 10-year yield was down 3 bps at 3.58%, edging away from Monday’s 3.65%, a high since 2009. Euro-area yields eased somewhat as oil steadied and some central bankers sounded more cautious, but hotter-than-expected inflation prints from France, Germany and Italy limited the relief. France’s harmonised inflation rate was 3.4%, up from 2.6% in August; Italy’s jumped to 4.1% from 3.2%.

Fiscal pressure

Beyond global factors — energy costs and AI-related growth — France faces a high deficit and political manoeuvring ahead of next year’s presidential election that could complicate consolidation. The government said late Tuesday it would sell a record €340 billion of bonds next year, with interest expenditure now expected €5 billion higher in 2026 and €7 billion higher in 2027 versus year-ago forecasts. ING’s Charlotte de Montpellier said higher rates are becoming “a source of fiscal deterioration,” and that without political or fiscal improvement the scope for a meaningful tightening of the France–Germany spread appears limited.