Bank of France Governor Villeroy de Galhau said on the 25th that France must do everything possible to avert a sovereign debt crisis ahead of next year's presidential election, and that it would be wrong to expect the European Central Bank to come to the rescue. The yield on French 10-year government bonds has surged to 4.7%, the highest level since the 2008 global financial crisis, as investors demanded a higher premium amid fiscal and political uncertainty. Villeroy stressed that a budget involving spending cuts is needed to put the fiscal deficit back on a downward path precisely in order to prevent a sovereign debt crisis before the presidential election. The government is scheduled to submit its 2027 budget proposal to parliament on October 1, kicking off weeks of deliberation. While noting that the government has been able to raise funds in the bond market without problems, he warned that rising debt interest payments pose a risk of gradually squeezing public finances, and when asked whether the ECB could intervene if funding difficulties arose, he said that trying to rely on such an idea reflects flawed logic.
French 10Y yield surges to 4.7% on fiscal/political uncertainty and warnings of a sovereign debt crisis, pushing the yield higher (bond price lower).
