French 10-year bond yields hit 5%, highest since 2002

France 10-Year Bond Yields Reach 5%, Marking Highest Level Since 2002

French Bond Market Faces Rising Yields and Investor Concerns

By Amanda Cooper

Record Highs in Bond Yields

LONDON, Oct 21 (Reuters) - France's 10-year government bond yield hit the 5% mark on Wednesday, a new 24-year high, the latest sign of growing concern among investors over France's ability to restore its fragile finances.

Global Trends Impacting Yields

Government bond yields have risen around the world this year, in light of the surge in energy prices that has prompted central banks to respond with interest-rate rises.

Debt Levels and Borrowing Costs

Developed market governments are also dealing with ballooning debt piles, and France has seen its borrowing costs rise more than most peers.

France's 10-year bond yield touched 5.002% as of 0914 GMT, and was last up about 8 basis points on the day at just below 5%.

Comparisons with German Bunds

Meanwhile, the premium investors demand to hold French bonds over benchmark 10-year German Bunds was at around 157 bps, nearing levels last seen in 2011.

Yield Gap Significance

The gap between French and German yields reflects the extra return investors demand for lending to the former.

Political and Economic Pressures

French bonds are under pressure because a weakened government is trying to get a budget through parliament and bring down a high deficit.

Election Uncertainty and Social Unrest

Uncertainty ahead of a hotly contested election next year and widespread protests across France are also hurting its markets.  

(Reporting by Amanda Cooper; Editing by Dhara Ranasinghe and Elisa Martinuzzi)