French 10-year bond yield tops 5% for first time since 2002 amid unrest

By Mucahithan Avcioglu

ISTANBUL (AA) - France's benchmark 10-year government bond yield climbed above 5% Wednesday for the first time since 2002, as political unrest and uncertainty over budget plans weighed on investor sentiment.

The yield on the 10-year French government bond, known as an OAT, crossed the threshold during morning trading before easing to around 4.98%, roughly six basis points higher on the day.

The rise in borrowing costs came as the government sought parliamentary support for its 2027 budget while facing protests over living costs and demands for greater education spending.

Prime Minister Sebastien Lecornu has proposed €54 billion ($60.6 billion) in spending cuts as part of efforts to improve public finances.

France remains under the EU's excessive deficit procedure, with its budget deficit standing at 5.1% of gross domestic product last year, above the bloc's 3% ceiling.

Investors are concerned that political divisions could undermine efforts to narrow the deficit and contain rising public debt.

Finance Minister Roland Lescure said Wednesday that the government was prepared to use constitutional mechanisms to secure passage of the budget if lawmakers failed to reach an agreement.

Speaking to French broadcaster RTL, Lescure expressed confidence that the budget would be adopted within the required timeframe.

- Protests complicate budget negotiations

The latest budget talks coincide with protests that began as a student movement in Paris last month and have since widened, with demonstrations increasingly turning violent.

Rioting and looting over the weekend caused damage estimated by officials at up to hundreds of millions of euros.

The unrest has complicated the government's efforts to reduce spending, with protesters demanding measures to ease living costs and increase investment in public services.

Mücahithan Avcıoğlu