10-year yield climbs to 5.002% during trading

Spread over German bunds widens to 15-year high

People watch a burned-out vehicle in Paris, France, on Tuesday (local time). [AP]
People watch a burned-out vehicle in Paris, France, on Tuesday (local time). [AP]

France's 10-year government bond yield has surpassed 5 percent for the first time since 2002, as widespread riots across the country ripple into financial markets.

According to Reuters and Bloomberg, the yield on France's 10-year government bond climbed to 5.002 percent during trading on Wednesday (local time).

The yield had already risen 0.13 percentage points between Sunday and Monday before extending its advance on Wednesday.

The spread between French and German 10-year yields widened to 1.594 percentage points during trading, the widest gap since 2011. German bunds are widely regarded as Europe's benchmark safe-haven asset. The move signals deepening market skepticism about France's fiscal health and political stability.

Selling of government bonds across the G7 has continued since the Middle East conflict began, but France has seen its yields rise faster than peers as its fiscal deficit widens and political uncertainty deepens.

Moody's is scheduled to release its credit rating decision for France on Friday, and markets widely expect a downgrade. Should that occur, analysts expect upward pressure on French bond yields to steepen further.

The French government is expected to deploy military forces to help suppress protests on Saturday.

Prime Minister Lecornu told parliament on Tuesday that authorities would deploy police "in large numbers" for the Saturday demonstrations, according to AFP and other media.

Large-scale protests erupted across France on Saturday over surging prices and other grievances. About 2,500 people have been arrested since then, with roughly 800 referred to prosecutors, and around 3,000 shops reportedly sustained damage.


hyuk@heraldcorp.com