Following the weekend riots in France, investors sold off French bonds and shares again on Monday, 19 October. As the Guardian reports, the gap in borrowing costs between France’s and Germany’s 10-year debt is widening.
According to the Guardian, the weekend violence left public buildings burned, hundreds of shops looted and thousands arrested across the country. Among the buildings set on fire was the town hall in Limoges.
What is happening in the market
The yield on French 10-year bonds rose by 7 basis points on Monday, to 4.849%, according to the KuCoin News aggregator, which relied on data cited in the Guardian’s report. The yield on 2-year paper increased by 2.5 basis points, to 3.571%. A higher yield means lower bond prices, that is, a higher cost of government borrowing.
The gap between the yields on French and German 10-year bonds, a measure of the risk premium on French debt, widened. The exact level of the spread was not given in the available excerpts. According to the same reports, the CAC 40 index opened about 1% lower, and the euro weakened slightly against the dollar (by 0.13%).
Background: protests and the government's response
According to the French Interior Ministry, nearly 2,400 people were arrested on Sunday. Police used tear gas in clashes with protesters in Paris, Bordeaux, Nice and Marseille, among other places. At the same time, peaceful marches took place, attended by tens of thousands of people demanding more teachers and repairs to damaged schools.
In an address on Sunday evening, President Emmanuel Macron condemned the “unbridled violence” and warned of long-term damage. He asked how the French could inflict such destruction on their own country.
Analyst's view
Jim Reid of Deutsche Bank said the protests would reduce the willingness of international investors to buy French bonds. He also pointed to political risks ahead of the 2027 elections.
What it means
For readers in Poland, the direct impact is limited: the movement concerns French debt, while Polish yields depend mainly on domestic factors. However, higher French debt servicing costs could weigh on risk sentiment in European markets and affect the euro and stock prices. It is worth remembering that this is a one-day move, and its scale (7 basis points) does not yet signal a crisis of confidence. At the time of publication, we had not seen a statement from the French finance ministry or the debt management agency on the market situation.
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