French 5-year credit default swaps hit 81 basis points on October 2, their highest level in several years. The spread between French and German 10-year rates (OAT-Bund) widened to 159 basis points, the highest since November 2011, and France is now borrowing more expensively than Italy. French public debt stands at 119% of GDP with a projected deficit of 5.4% in 2026, nearly double the European limit of 3%. Investors doubt the government’s ability to pass and maintain a 2027 budget featuring 54 billion euros in savings, less than six months before the April 2027 presidential election. Each additional basis point costs roughly 31 million euros in extra annual interest on the 310 billion euros in debt the Agence France Trésor plans to issue in 2026.
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