French 10-Year Yield Hits 5.11% as Budget Rejections Set Aside €10B in Cuts

French borrowing costs climbed Thursday as this week’s rejected spending measures had already set aside about €10 billion in planned deficit cuts, adding pressure to a budget whose full votes are still ahead.

The 10-year French government bond yield reached 5.11%, its highest level since 2002. The premium over comparable German debt widened to 174 basis points, the widest since 2011. A basis point is one-hundredth of a percentage point, so the spread represents a 1.74-percentage-point difference between the countries’ 10-year yields.

The spread had reached 157 basis points before easing to about 150 late Oct. 21. It has since widened again, extending an earlier rise in the French-German bond gap. The premium measures the extra yield investors demand to hold French government debt instead of German bonds with a similar maturity.

Lawmakers rejected reduced-spending measures this week, putting about €10 billion in planned deficit reductions aside. Formal votes on the full budget have not yet taken place, and some of its most contested measures remain under debate.

The government is seeking to bring the public deficit to 5% of gross domestic product in 2027, from an expected 5.4% in 2026. One proposal would limit pension increases tied to inflation: about one-third of pensioners, primarily those with lower incomes, would continue to receive full increases, while larger pensions would get partial increases or be frozen.

Lawmakers are also expected to consider measures intended to slow the growth of health and pharmaceutical spending. The remaining budget votes will determine which parts of the government’s deficit-reduction plan survive the debate.