French bond yields surge as unrest widens gap with Germany

The yield on French 10-year government bonds rose to 4.94% on Tuesday, widening the spread over German bonds to more than 150 basis points, the highest level since 2012, following widespread unrest in France. Investors view French bonds as riskier than German ones, and market analysts are awaiting a Moody's credit rating decision on France scheduled for Friday, as a downgrade would automatically increase government borrowing costs. Prime Minister Sebastien Lecornu faces difficult choices as he cannot meet protester demands for increased spending while seeking to cut public expenditure by 54 billion euros in the 2027 budget. The unrest over the past two days targeted public buildings, shops, and restaurants, with unions calling for a general strike on November 5. Analysts noted the turmoil adds political risk for markets, with France already facing financial difficulties ahead of the 2027 elections.