French 10-year bond yield tops Italy levels after PM falls

Paris, Sep 09, 2025 -France’s borrowing costs exceeded those of traditional European debt laggard Italy on Tuesday, reflecting investor worries over the country’s finances and political stability after Prime Minister Francois Bayrou‘s ouster.

The yield on 10-year French bonds rose at one point to 3.48 percent compared to 3.47 percent for Italian bonds — a situation unseen in years.

It later fell back to 3.41 percent at the Paris stock market close, which saw the benchmark CAC 40 index edge up 0.2 percent.

Investors had anticipated that Bayrou would lose Monday’s confidence vote in parliament that toppled this government after nine months in power.

Bayrou had blindsided even his allies by calling the vote to end a lengthy standoff over his austerity budget, which called for almost 44 billion euros ($52 billion) of cost savings to reduce France’s debt pile.

France’s debt has reached 3.3 trillion euros, or 114 percent of its gross domestic product.The next test for the government comes Friday, when credit ratings agency Fitch is to deliver its verdict on France’s debt.Fitch currently has an AA- rating for France with a negative outlook, and a downgrade could prompt investors to demand a higher rate for holding French government bonds.

“Over the past three years, the deficit has been rising in France, the opposite of what has been happening elsewhere in Europe,” said Julien-Pierre Nouen, director of economic research at Lazard Freres Gestion.

President Emmanuel Macron will now have to find a new prime minister who can try to rein in spending.

Bayrou had wanted to cut the budget deficit down to 4.6 percent of GDP next year from an estimated 5.4 percent this year, and below the three percent required by EU rules by 2029.

He was the sixth prime minister under Macron since his 2017 election and the fifth since 2022.

“France has just entered a new zone of turbulence,” said John Plassard, head of investment strategy at Cite Gestion Private Bank.