(Le Figaro, Julie Ruiz Perez, March 24, 2026)
Financial markets experienced a session of intense shocks: on Monday morning, the yield on French 10-year government bonds shot up almost vertically, surpassing 3.80% in the morning (the highest since 2009) and nearly reaching 3.87% late in the morning, before temporarily falling after Donald Trump announced the postponement of attacks on Iranian energy infrastructure.
The Italian BTP yield reached 3.87%, the German Bund 3.07% (the highest since 2011), and the British yield 5.10%. In the afternoon, the French rate settled around 3.72%, still well above the 3.20% before the crisis. If this tension persists, it will further worsen France’s public finances, already burdened with debt at 117% of GDP and a deficit around 5.4% in 2025, the worst performance in the eurozone.
Volatility reflects the bond markets’ sensitivity to the conflict: on one hand, stock markets still bet on a short war, while on the other, yields rise due to fears of a return of inflation driven by high oil prices and a more restrictive ECB monetary policy (investors now expect two rate hikes in 2026). The result is a worrying increase in interest expenses on French debt, rising from 36 billion in 2020 to about 60 billion forecasted in 2026, with a real risk of reaching 80-100 billion by the end of the decade if rates remain high.
Record cost of French debt
“On Monday morning, the interest rate curve of French 10-year government bonds went almost vertical. At the opening, it exceeded 3.80%, a historic level, the highest since 2009. Late in the morning, it even nearly touched 3.87%. Some experts were already imagining scenarios with Treasury bond yields at 4% by Tuesday morning.”
Reaction after Trump’s words
“Around noon, Donald Trump announced the postponement of the attacks, mentioning ‘very good’ discussions with Iran. These statements immediately cooled the markets: the price of oil collapsed from $113 to $97 per barrel. Stock markets resumed upward, and sovereign rates fell. The French debt yield briefly dropped to around 3.65%, then slightly rose again in the afternoon to about 3.72%.”
Impact on public finances
“If this fever lasts, it will further degrade the state of public finances. The debt servicing charge is accelerating at a worrying pace, rising from about 36 billion euros in 2020 to nearly 60 billion expected in 2026, with a credible risk of drifting towards 80-100 billion by the end of the decade if rates remain high.”
Volatility and inflation
“Stock markets still anticipate a fairly short conflict, while bond markets react in anticipation of rising inflation. The sharp rise in oil prices linked to the Middle East conflict fuels fears of a strong return of price increases. Higher inflation reduces the real value of amounts repaid by debtors to creditors, who therefore demand higher interest rates.”
Risk for France
“With the deficit still above 5% and debt at 117% of GDP, France would struggle to afford support measures like those announced by Spain, Italy, Portugal, and Sweden. The preparation of the 2027 budget law will be a decisive moment to see whether the country will choose fiscal consolidation or continue to finance spending with increasingly costly debt.”
(Excerpt from the newsletter by Giuseppe Liturri)
