The French 10-year OAT yield closed at 4.93 percent on Monday, up from 4.80 percent on Friday evening, as the CAC 40 fell 1.11 percent to 7,868 points. French bank shares were among the weakest performers, with Crédit Agricole down 2.64 percent and BNP Paribas down 2.48 percent. The move came the day after violence following the 17 October protests.
Moody’s is scheduled to review France’s rating on Friday after European markets close. The agency downgraded France to Aa3 in December 2024 and placed it on negative outlook in October 2025. It confirmed Aa3 on 10 April, citing a budget agreement that no longer exists. Options on the table include keeping Aa3 with a negative outlook, cutting the rating to A1, or returning the outlook to stable.
Spreads and debt levels
The spread of the French 10-year over the German Bund stood at 147 basis points. The French yield has risen 130 basis points since 2 January and 38 basis points over the past month. France’s 5-year credit default swap traded at 82 basis points.
French public debt reached 3,595 billion euros, or 119 percent of GDP at the end of June. The Agence France Trésor plans to issue 340 billion euros of debt in 2027, and the government targets a deficit of 5.0 percent of GDP that year, down from 5.4 percent this year. Christopher Dembik of Pictet AM said French debt is trading at a level comparable to that of an issuer rated BB+.
Investor reaction
Deutsche Bank strategists said the violence would not help international investors feel comfortable buying French bonds. Kevin Thozet of Carmignac said six more months of political vacuum would be a particularly long period for markets. Commerzbank expects the spread impact of a downgrade to remain limited. Allianz Research estimates a spread of 175 to 200 basis points in an adverse scenario.
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