France’s borrowing risk premium over Germany has reached its highest level since the 2012 eurozone debt crisis, highlighting increased pressure on the country’s government bond market.

On September 18, 2026, the premium investors demanded to lend to France rather than Germany reached 1 percentage point, or 100 basis points, for the first time since July 2012.

What Is France’s Borrowing Risk Premium?

The borrowing risk premium is commonly measured by comparing the yield on French government bonds with the yield on German government bonds of a similar maturity.

Germany’s government bonds are widely used as a benchmark within the euro area. When the difference between French and German yields increases, it means investors are demanding a larger additional return to hold French debt.

This difference is known as the OAT-Bund spread, referring to French OAT government bonds and German Bunds.

The Spread Reaches 100 Basis Points

According to Reuters, France’s 10-year government bond yield rose to approximately 4.573% on September 18, while the risk premium over Germany reached a full percentage point.

A difference of 100 basis points is equal to:

1 percentage point = 100 basis points

The move marked the highest French borrowing premium over Germany since 2012.

Why Are Investors Watching France Closely?

France is facing significant pressure over its public finances.

The government is working on a 2027 budget that includes around €54 billion in planned savings, with the objective of reducing the budget deficit. Reuters reported that France’s deficit was projected at around 5.4% of GDP in 2026, while the government is seeking to reduce it to 5% in 2027.

The country’s public debt is also increasing. France’s Finance Ministry projected debt at 119.3% of GDP in 2026 and 121.7% in 2027.

Political Uncertainty and the Bond Market

Political uncertainty is another factor being monitored by financial markets.

France’s parliament remains divided over fiscal policy, making negotiations over the 2027 budget an important issue for investors.

Reuters reported that the bond-market spread has doubled since France’s 2024 snap election, amid political difficulties surrounding efforts to reduce the country’s deficit.

The upcoming 2027 presidential election is also part of the broader political backdrop surrounding investor expectations.

Rising French Bond Yields

The increase in the risk premium has been accompanied by higher French government bond yields.

On September 18, the 10-year French yield reached about 4.573%, while two-year French yields rose to around 3.536%. Reuters reported that French 10-year yields had increased by about 12.5 basis points during that week, the largest weekly increase among G7 countries at that time.

Higher government bond yields generally mean a government must offer investors a higher return when borrowing in financial markets.

France Compared With Other European Countries

France’s borrowing costs have also attracted attention because its risk premium has risen relative to other major European economies.

Reuters reported that French borrowing costs had moved above those of Italy during the period of market pressure, although government bond yields across the euro area were also increasing.

Germany’s 10-year bond yield was around 3.52% on September 18, according to Reuters.

The Cost of Insuring French Debt

Another indicator being watched by investors is the market for credit default swaps (CDS), which can be used as insurance against a government default.

Reuters reported that the cost of insuring French debt reached around 41.5 basis points on September 18, the highest level since April 2025.

This does not mean that France was expected to default. Rather, it reflects the price investors were paying for protection against credit risk.

Energy Prices Add to the Pressure

Financial markets have also been affected by higher energy prices and broader geopolitical uncertainty.

Reuters reported that elevated energy prices were contributing to inflation concerns and higher borrowing costs across Europe. These conditions can make it more difficult for governments to manage debt while economic growth remains subdued.

France had already reduced its 2026 growth forecast from 0.7% to 0.5% earlier in September, according to the French government.

What Does This Mean for France?

A wider OAT-Bund spread means that France is paying a larger premium compared with Germany when borrowing in the bond market.

For the French government, sustained higher borrowing costs can increase the cost of servicing public debt.

For financial markets, the spread is one indicator used to monitor how investors view the fiscal and political outlook.

The risk premium can also change quickly as economic data, government budget decisions, interest rates, and market sentiment develop.

What Happens Next?

The French government is continuing work on its 2027 budget, while investors are watching developments in public spending, the deficit, debt levels, economic growth, and interest rates.

The European Central Bank’s monetary policy is also relevant because changes in euro-area interest rates can affect government bond yields across member states.

Future movements in France’s borrowing premium will depend on a combination of fiscal developments, economic conditions, energy prices, monetary policy, and investor expectations.

Conclusion

France’s 10-year borrowing risk premium over Germany reached 100 basis points on September 18, 2026, its highest level since 2012.

The increase comes as France deals with high public debt, a large budget deficit, slower economic growth, and negotiations over its 2027 budget.

The OAT-Bund spread will remain an important indicator for following changes in France’s borrowing costs and financial-market conditions.