France’s 10-year government bond yield exceeded 5%, hitting a new high since 2002

China News Service, Paris, October 21 (Reporter Li Yang) France's 10-year government bond yield exceeded the important mark of 5% on the 21st, setting a new high since 2002.

French government bond yields have continued to rise over the past few weeks. Analysts generally believe that various factors such as the difficulties of France's public finances, the deadlock in budget reviews and violent conflicts during protests have contributed to the rise in government bond yields.

The continued rise in government bond yields not only means that the French government's borrowing costs are affected, but also means that the borrowing costs of companies and households may rise accordingly.

The yield spread between France's 10-year government bonds and Germany's 10-year government bonds has also widened, once approaching 160 basis points. The international rating agency Moody's will make a decision on France's sovereign credit rating this weekend. If the rating is downgraded, it may further increase the government's borrowing costs.

According to data from the French National Institute of Statistics and Economic Research, as of the end of the second quarter of this year, France’s public debt was approaching 3.6 trillion euros, equivalent to 119% of gross domestic product, which has further increased compared with the first quarter of this year. The financial pressure faced by the French government continues to increase.

France's 2027 budget draft is currently under review by the National Assembly. French officials have previously confirmed a 54 billion euros savings plan in an effort to reduce the fiscal deficit. However, judging from the review process, it is currently difficult for the relevant expenditure reduction plan to obtain majority support in the parliament. Even if the budget is finally passed, France's deficit level in 2027 will only be reduced to 5% of GDP, which is still significantly higher than the 3% deficit limit set by the EU.

The French government plans to issue medium- and long-term bonds totaling approximately 340 billion euros in 2027, a considerable part of which will be used to repay maturing debt.