French markets face mounting strain from debt worries and political gridlock ahead of the 2027 election: the 10-year yield gap over Germany topped 110 basis points, its widest since the 2012 euro crisis, while French debt-insurance costs reached a near-decade high.
French five-year credit-default swaps traded around 52 basis points, their highest since April 2017 and double their level six months earlier. Insuring $100 in French bonds cost 52 cents a year. In the past three months, French swaps rose 25 basis points, compared with about 13 for Italy and little change in Germany. France’s stock market fell 0.5% this year as broader European markets gained roughly 8%; the OECD forecast French growth of 0.4% in 2026, versus 1% in the euro zone. Scope downgraded France last Friday, and Moody’s could follow in late October.
Analysts said a 2027 runoff between far-right Marine Le Pen and far-left Jean-Luc Mélenchon could hit French markets hard. A Natixis strategist said some investors were betting against French government-bond futures, but much of their recent decline reflected a global bond selloff. Domestic banks have struggled amid the uncertainty. The euro fell below $1.14 to a three-month low; traders currently priced in at least three rate increases by April, though some ECB policymakers sought to temper expectations.
