Government bonds: 30-year rates soar in the United Kingdom, the United States and France

6.029%. This Thursday, October 1, the 30-year rate on British government bonds, “gilts,” exceeded the 6% mark for the first time since January 1998. However, in 2020, the same Treasury borrowed for three decades at around 0.4%.

This shock comes in the midst of a global surge in rates, and France is not a spectator. Indeed, over the same period, Paris already pays around 5.4% and Washington almost 5.6%. The three countries therefore borrow at almost the same price. However, they do not have the same weapons to withstand the shock.

30-year rates in the United Kingdom: energy sets gilts on fire

It all starts with an invoice. Indeed, the United Kingdom heats its homes and produces a good part of its electricity with gas. However, the wholesale price of this gas jumped by 78% between July and mid-September, according to the Bank of England. Additionally, Brent exceeds $106 per barrel. Inflation therefore follows the movement.

It thus reached 3.1% in August, including 0.7 points due to the direct effects of energy alone according to the central bank. Worse, this sees it rise above 4% in the first quarter of 2027. On September 17, its committee nevertheless maintained the key rate at 3.75%, while three members out of nine were already calling for an increase to 4%. The markets have already done the rest of the calculations.

As a direct result, the British 10-year rate climbs to 5.51%, unheard of since July 2007. Lending in the United Kingdom over the long term now costs a premium that no one has demanded for a generation.

Gilts: the ghost of Liz Truss still lurks in the City

London investors also have long memories. In September 2022, Liz Truss's "mini-budget" promised some £45 billion in unfunded tax cuts. The British 30-year-old then soared beyond 5%. The Bank of England even had to urgently buy back gilts. Today, the rate exceeds this peak by almost a point, without the slightest explosive budget.

30-year rate in the United States: the dollar no longer protects everything

Across the Atlantic, the 30-year rate reached 5.59% on September 29, according to data from the Federal Reserve. According to this same series, we have to go back to May 2004 to find an equivalent level. The 10-year bond stands at 5.26%, while the effective key rate remains at 3.88%.

However, the United States has a unique privilege. The dollar remains the world's reserve currency, and central banks around the world are stockpiling Treasury bills. Despite this cushion, American debt is becoming more and more expensive. Thus, the gap between the effective key rate and the 30-year rate now exceeds 1.7 points.

Rate at 30 years in France: the cheapest, the most exposed

On paper, France is doing better. Its 30-year rate stood at 5.40% on September 29 according to market data compiled by Trading Economics, a record in a series dating back to 1994. The 10-year rate is around 4.75%, its highest since 2008.

This classification, however, deceives the eye. Paris indeed benefits from Germany’s anchoring within the euro zone. However, the rate gap with Germany, the famous OAT-Bund spread, exceeds 110 basis points, or 1.1 percentage points. It was around 55 at the start of the year. This is now a level not seen since 2012.

French debt: Paris plays without a net

In reality, France controls neither its currency nor its central bank. The Bank of England proved in 2022 that it could intervene alone, and Washington is issuing the currency that the whole world is demanding. France depends on the ECB, whose safety net remains conditional on compliance with European budgetary rules. Paris has, however, been the subject of an excessive deficit procedure since July 2024.

Add a debt of 119% of GDP at the end of June according to INSEE, a deficit that the government only hopes to reduce to 5% in 2027 and an A+ rating from Fitch. The picture quickly darkens.