Credit default swaps for 5 year French sovereign debt climbed to 73.05 basis points on Oct 1, the highest level since July 2013. The 10 year yield spread between French and German government bonds widened 8 basis points to 135 basis points on the same day, marking the widest gap since the European debt crisis 14 years ago. French 10 year bonds also reached a record yield of 126 basis points above swap peers as bond markets reacted to political instability.

Borrowing costs for Paris have now surpassed those of Italy and Greece, while corporate entities such as LVMH are viewed by some investors as safer credits than French government bonds. This reversal in risk comes as France manages a projected budget deficit of 5.4% of GDP this year and prepares for a €340B bond issuance in 2027. Hedge funds are now betting on a weaker euro against the dollar as the French fiscal situation creates spillover effects across euro area government bonds.