France's Borrowing Costs Overtook America's for the First Time Since 2013
French 10-year borrowing costs crossed 5% and briefly overtook U.S. Treasuries for the first time since 2013. A ratings reprieve slowed the rout for a day; a budget vote now decides whether the wait was warranted.
France's 10-year government borrowing cost spent a short period around Oct 22 above the equivalent U.S. Treasury yield, something that had not happened since 2013. The crossover arrived as the French 10-year OAT rose above 5% for the first time since 2002, on Oct 21.
On Oct 22 the 10-year OAT touched about 5.13% with the German Bund at about 3.38%, a spread of 174.6 basis points, the widest since the 2011-2012 euro-area debt crisis. The same day, the 10-year U.S. Treasury yield fell below 5% for the first time in about a month as French turmoil fueled a flight to safety.
A core euro-area issuer was, for that stretch, paying more than the United States to borrow for 10 years, and paying Germany a gap last seen in the early-2010s debt crisis. A fragmented parliament has yet to produce a deficit-cutting plan that investors will fund at anything like German levels.
The budget arithmetic
Prime Minister Sebastien Lecornu is targeting 54 billion euros (about $60.6 billion) in spending cuts for the 2027 budget. Finance Minister Roland Lescure said the government has "guardrails" to force the budget through without a vote, including Article 49.3 of the constitution. In February this year the Lecornu government used emergency legislation to pass that year's budget without parliamentary approval.
Moody's on Oct 23 kept France at Aa3 and retained its negative outlook, citing the risk that fragmentation of France's political landscape continues to impair its legislative institutions. S&P Global and Fitch cut their French ratings in 2025. The hold on the rating did not rewrite the fiscal ratios the bond market is looking at.
France's deficit-to-GDP ratio is roughly 5.5%, well above the EU's 3% limit. The country faces more than $1 trillion of debt maturing by 2030, and the finance ministry warned the debt-to-GDP ratio is expected to hit 121.7% in 2027. Non-residents hold about 57.5% of French debt. France's government cut its 2026 growth forecast to just 0.5%, and the euro has fallen almost 5% against the dollar since the start of 2026.
A core name, a 2011-style spread
Around Oct 27, Germany's 10-year Bund yield was about 3.35 to 3.36%, roughly 159 to 160 basis points below the French 10-year. Over the past year the OAT-Bund spread ranged from 59.0 to 174.6 basis points and averaged about 79.5. The Oct 22 print sat at the top of that range.
George Lagarias, chief economist at Forvis Mazars, estimated the risk of a broader euro-area spillover like the early 2010s at about 10% to 20%. He said France is already in a debt crisis, with debt-to-GDP of 119% at end-Q2 2026, close to Greece's 128% in late 2009. A closely watched distress metric, the spread of French over German 10-year yields, hit more than 170 basis points on Thursday, Oct 22, for the first time since the early-2010s debt crisis.
That comparison is Lagarias's. A 119% debt ratio, a 5.5% deficit, a 121.7% debt-to-GDP warning for 2027, and more than $1 trillion to refinance by 2030 are the claims the market is discounting into the spread.
Why analysts still fade a 2011 rerun
Citing stronger banks, greater integration, and euro-area tools, analysts including John Stopford of Ninety One and Alex Everett of Aberdeen Investments argue contagion risk is limited this time despite wide spreads. Their case is institutional: banks are stronger than in 2011-2012, the euro area is more integrated, and the toolkit built after that crisis is what they say keeps a French spread blowout from becoming a regional sovereign run.
The two readings can sit on the same tape. France can pay more than the United States for 10-year money, as it did for a short period around Oct 22, and still be treated as a France problem rather than a euro-area problem. Lagarias puts the chance of an early-2010s-style spillover at about 10% to 20%. Stopford and Everett put the weight on banks, integration, and official tools.
What the market has already done is reprice the core. The OAT-Bund gap reached 174.6 basis points on Oct 22, more than twice the past year's average of about 79.5, and still stood near 159 to 160 basis points around Oct 27. Moody's left the rating at Aa3 with a negative outlook after the 10-year OAT had already gone through 5%, through the U.S. Treasury, and through a crisis-era spread over Bunds.
The next data point is the 2027 budget. Lecornu's 54 billion euros of targeted cuts, and Lescure's Article 49.3 guardrails, are the government's answer to a 5.5% deficit and a 121.7% debt-ratio warning. Until that package is law, France is funding a core euro-area book at a peripheral-era concession, while the argument among analysts is how far that concession travels beyond Paris.