Rising inflation and political instability have triggered a mass exit from France's sovereign debt markets. Government borrowing costs for 10 year notes reached their highest levels since 2002, as a selloff pushed the yield premium over German bonds to 124 basis points on Sept 30. This shift marks the first time that specific risk measure has exceeded 120 basis points since 2012 and means French bonds now yield 22 basis points more than Italian debt in an unprecedented reversal for the euro era.

The pressure on Paris's finances comes as the government prepares a record €340 billion bond issuance in 2027 and projects a budget deficit of 5.4% of GDP for this year. Investors are currently adjusting for potential political upheaval in the coming year, while other regional peers face similar stress, with Italy's bond risk premium crossing 100 basis points for the first time since March.