Investment funds are positioning for a currency drop as France faces its most severe bond selloff since 2012. The yield on the benchmark 10 year government bond climbed to 4.93% from a previous 4.23%, while hedge funds have begun betting the euro will weaken against the US dollar. Costs to insure French debt against default also spiked, with 5 year credit default swaps hitting 71.6 basis points, the highest level since July 2013.

The market turmoil has led to an unprecedented reversal in the euro era, with Paris now paying 22 basis points more to borrow than the Italian government. This volatility is driven by political instability, a projected budget deficit of 5.4% of GDP, and an upcoming €340 billion bond issuance in 2027. With a 10 year yield spread over Germany reaching 124 basis points, the state's borrowing costs have surpassed those of blue chip corporations like LVMH.