French bonds open a 149 basis point gap over Bunds, widest since 2012

The gap between French and German 10-year bond yields pushed past 140 basis points on Friday and, on Reuters' measure, as wide as 149, the widest since the eurozone debt crisis of 2012. On Thursday the spread was already 132.86 basis points. Deutsche Bank strategist Jim Reid said the day's jump of 13.9 basis points was the largest since March 2020.

French 10-year yields traded near 4.89 to 4.935 percent, the highest area since 2002 on some screens. German 10-year yields fell, to about 3.475 percent in one Friday reading and 3.529 percent in another, a fourth straight session of declines and a path to the first weekly drop in eight weeks. Investors were buying Bunds and selling French OATs at the same time. That split is the signal. A global rate move would have lifted both. This one did not.

The trigger is fiscal. France's government has tried to calm the market with a plan for 43 billion euros in budget cuts and tax rises next year. The plan has not convinced buyers that Paris can rein in a deficit projected at 5.4 percent of GDP. ActionForex noted the French 10-year yield well above its four-hour 55-period average near 4.616 percent, with RSI above 80, while the Bund had fallen back toward its own average near 3.535 percent. The chart and the spread are telling the same story: a France-specific premium.

The euro felt it. The single currency slid as far as 1.1215 dollars, the lowest since May 2025, and weakened against the yen and the Swiss franc. EUR/CHF is the cleaner foreign-exchange read, because the franc picks up European stress without the dollar's own noise. Equity markets were a third-order effect. European shares rose on Friday as the wider bond sell-off cooled, and the STOXX 600 was still heading for a weekly drop of about 1 percent.

Elsewhere the rate shock was not only French. Japan's long-term yields hit multi-decade highs on Friday. The US 10-year Treasury yield reached a 24-year high on Thursday, ahead of Friday's jobs report. Forecasts for that report centre on a gain of about 90,000 nonfarm payrolls in September, with unemployment expected to hold at 4.1 percent. Asian shares fell into the data. Oil stayed firm, with West Texas Intermediate near 92.84 dollars a barrel after a near 3 percent jump, on a larger US military move toward the Gulf and on China's suspension of oil-product exports.

Those global moves explain why yields are high. They do not explain why France is pulling away from Germany. The 140 basis point line is the test traders are using. A spread that wide last appeared when markets were pricing a breakup risk in the euro area. Nobody is publishing that scenario as a base case now. What they are publishing is a number: investors want roughly a point and a half more yield to hold French debt than German debt, after a 13.9 basis point jump in a day.

Dealers will also watch whether the Bund rally fades once the US jobs number is out. A soft payroll print can pull all yields down and shrink the gap without France doing anything. A hot print can lift both and leave the spread where it is. The France-specific test survives either result: the gap, not the level. A package of 43 billion euros still has to pass a National Assembly that has brought down budgets before. Buyers who remember 2012 are not pricing a French exit. They are pricing a government that may not be able to pass the cuts it has just announced, while the deficit stays at 5.4 percent of GDP. Monday's open will show whether Friday's print was a spike or a new clearing level for French debt.