France's bond market is experiencing significant turmoil as borrowing costs continue to rise amid ongoing budgetary challenges and public protests. On Thursday, French borrowing costs surged, with the difference between French and German 10-year borrowing costs reaching its highest level in nearly 15 years.
Rising Yields
The yield on the French 10-year bond, known as obligation assimilables du Trésor (Oat), increased by nine basis points to 5.089% in early trading on Thursday, marking its highest level since July 2022. This yield crossed the 5% threshold on Wednesday for the first time since 2002, surpassing the equivalent yield for US Treasury bonds for the first time since 2013.
Context of Protests
This volatility in the bond market coincides with the French government's struggle to pass a budget for the upcoming year, following widespread protests that escalated into violence over the weekend. Tens of thousands participated in peaceful marches demanding more teachers and repairs to dilapidated schools. However, clashes occurred between different groups and police in cities such as Paris, Bordeaux, Nice, and Marseille. The interior ministry reported nearly 2,400 arrests as public buildings were attacked and businesses looted.
