French 10-year yield nears October high as spread over German Bunds widens

The French 10-year yield rose almost 10 basis points on Monday to 4.94 per cent, on track for its biggest one-day rise since March 2025.

The gap over German Bunds widened to 146 basis points, its widest in two weeks.

That puts France in a bind. Higher yields push up borrowing costs for mortgages and loans, which makes credit harder for young people to get and adds to the squeeze on households. At the same time, the bond market is pressuring the government to cut public spending, which hits the same households from the other side. Both feed public anger.

On October 9, deputies voted 31 to 3 to reject the revenue section of the social security budget, sending the text back to the government.

French inflation ran at 3.1 per cent in September, above forecasts. The Bank of France puts third-quarter growth at just 0.1 per cent.

Euro zone officials say the market stress has stayed contained to French assets, with haven demand showing up in gold rather than spilling into US equities.

Polls point in an unexpected direction. OpinionWay has Mélenchon, who backs the protests but not the violence, at 49 per cent among 18 to 24 year olds, against 28 per cent for Le Pen. That does not suggest the protests are pushing the country toward the right in the longer run.

Mélenchon's campaign promises to tax the rich and corporations hard, spend more on public services, and ease the debt burden by having the ECB cancel or freeze the debt it holds, instead of cutting.

That could deepen the dilemma. The voters hurt most by high yields are backing the candidate whose debt plan the bond market is least likely to trust.