The cost of borrowing for the French government retreated from its extreme intraday highs late Friday afternoon. The 10 year yield spread between French and German sovereign bonds fell to 140 basis points after peaking at 159 basis points, following a session of extreme volatility where spreads hit 152 basis points, the widest since November 2011. France's 10 year government bond yields also touched 4.989%, the highest level seen since 2002.

The rout is driven by fiscal concerns, including a projected budget deficit of 5.4% of GDP this year and a planned record €340 billion bond issuance in 2027. This pressure has created an unprecedented reversal in European credit, with France now paying more to borrow than Italy and Greece. In other signs of eroded confidence, 5 year credit default swaps hit an 13 year high of 81 basis points, and some market participants now view blue chip stocks like LVMH as safer than government bonds.