French government bond yields hit their highest level in 24 years earlier this month, with rates on 10-year bonds at 4.9%, up from 3.2% at the end of February. They now hover around 4.8%.
A sell-off could also lead to pressure on UK government bonds, which are also under increasing pressure due to the war in Iran and Andy Burnham’s public spending plans.
Jonas Goltermann, chief markets economist at Capital Economics, said: “There will be an escalation of market turbulence. The outlook is going to be poor, the bond market is generally exhausted and France is currently the scapegoat.
“It shows that whoever is in power, people don’t want to reduce the debt. They want more spending, not less.”
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