France’s borrowing rates are soaring, at their highest since 2011

This Thursday morning, the yield on French ten-year sovereign rates reached its highest since 2011, climbing to 3.40% at the start of the morning. This peak in tension occurs in the context of an overall increase in bond yields on the markets. The British ten-year rate peaked on Wednesday and sovereign bonds are also soaring in the United States this week.

Several factors explain the nervousness of the markets: on the one hand, central banks, after years of expansion, are finally reducing their balance sheets and no longer buying sovereign securities. However, this withdrawal comes at a time when States are forecasting historically high emissions. The future policies of the American president-elect, Donald Trump, are worrying. Protectionist measures could revive inflation and thus disrupt monetary policy.

French political instability

France, however, stands out in this generally difficult environment for its political instability. The distrust towards the French trajectory can be seen through the evolution of the gap between the yield of French and German bonds, the famous spread. However, it reached 86 basis points on Thursday, up since the start of the year. The hypothesis of a possible unraveling of the pension reform, which François Bayrou seems to be considering, can only worry investors.

The increase in sovereign yield complicates the country’s budgetary equation. In fact, it increases the cost of debt issues. A challenge for a country which plans to raise 300 billion euros this year.