French Government-Bond Yields Jump, Spread Widens as Treasury Yields Fall — Update

By Emese Bartha

Yields on French government bonds rose sharply on Thursday just as those of their U.S. and German peers fell, taking the spread between 10-year French and German yields to its widest since 2011.

Concerns about whether France's fractured parliament will agree to a budget aimed at reducing the country's high deficit, particularly amid recent violent protests, caused the 10-year French yield to surge to its highest since 2002 at 5.142%, LSEG data showed.

Selling in French bonds came against the trend of lower yields in German Bunds and U.S. Treasurys amid falls in equities and concerns about the sustainability of debt-funded investments in artificial intelligence infrastructure. The 10-year French OAT-German Bund yield spread consequently widened to a steep 173 basis points.

"Current market developments warrant careful monitoring, but [French bond spreads] remain far from levels that prompted European Central Bank concerns in the past," Marco Valli, head of macroeconomic analysis and chief economist at The Investment Institute by UniCredit, said in a note.

When the ECB launched the Transmission Protection Instrument, the 10-year Italian BTP-German Bund yield spread fluctuated around 200-250 basis points, well above the current level of OAT and BTP spreads to Bunds, he said.

Should concerns over France intensify, German government bonds could once again be sought as a safe haven, Eyb & Wallwitz portfolio manager John Petersen said in a note.

The 10-year German Bund yield declined 5.4 basis points to 3.371%, according to Tradeweb.

The volatility witnessed in sovereign bond markets is no longer just a rates story, said Mitch Reznick, head of cross border credit at Federated Hermes. It is leading to changes in risk appetite and driving a genuine decompression in corporate credit spreads, he said.

The cost of insuring euro-denominated credit against default rose to its highest in nearly seven months, with the iTraxx Europe Crossover index of euro high-yield credit default swaps reaching 329 basis points, S&P Global Market Intelligence data showed.

U.S. Treasury yields slid meanwhile, amid falls in equities and ever-dimmer prospects of the Federal Reserve raising interest rates at next week's meeting.

The 10-year Treasury yield declined 7.3 basis points to 5.072%, while the 30-year Treasury yields fell to a four-week low of 5.376%.

Much of the safe-haven demand due to risk aversion and France concerns has flowed into Treasurys, Zaheer Anwari, founder of The Revacy Fund, said in a note.

Write to Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

October 22, 2026 06:52 ET (10:52 GMT)