For years, investors in Japan helped pay France’s bills. Japanese bonds paid almost nothing, so their money went abroad. French bonds were easy to trade and paid a bit more, yet still felt safe. That trade is turning. Japan’s own bonds pay again, and France needs the money more than ever.
Joe Wallace’s Friday story (A7) has the numbers. Almost 55% of French government debt was owned outside the country last year, per the EU’s data service. The U.S. figure is 31%. Japan’s is 13%. Foreign buyers used to step in whenever French yields rose. This fall they may be stepping back. Claus Vistesen of Pantheon Macroeconomics calls it “a big vulnerability in France.” Official data lag, so nobody can see the flows yet. But a Japanese pension fund doesn’t need to hunt for yield in Paris when Tokyo pays.
France’s 10-year yield passed 5% on Wednesday, Oct. 21, for the first time since 2002. The extra yield it pays over Germany, Europe’s benchmark borrower, is more than 1.5 percentage points. That gap has doubled this year and is the widest since 2011. On Friday’s bond table, the French 10-year closed Thursday at 5.076%, above the U.S. Treasury’s 4.952%. More than $1 trillion of French debt matures by 2030, and next year’s bond sales are set at a record $380 billion. The 2025 deficit was 5.1% of GDP. Pimco’s Konstantin Veit says his firm is likely to stay cautious until it sees a credible plan to shrink it.
The riots reached the grocery aisle
Cost-of-living protests led by students have turned into riots, and the prime minister ordered local curfews. On the evening of Tuesday, Oct. 20, the supermarket chain Carrefour cut its profit targets for the year. It blamed fewer shoppers, shorter hours under curfew and higher security costs. Its shares fell 13.8% in Paris on Wednesday (Thursday B3). Third-quarter sales still grew 2.3% on a like-for-like basis, which strips out new and closed stores.
We don’t take sides on the politics. Holman Jenkins, in Wednesday’s opinion pages, calls France “too big to fail and also too big to bail out.” His fixes include a retirement age of 67, up from 62, and steeper copays for medical care. France elects a president next spring. Two Journal columnists expect a strong run by a candidate whose signature promise is a retirement age as low as 60. Each side makes its case to French voters. The bond market gets to set the price.
Our read
Fixed Income · IN02. Who owns a government’s debt matters most on the day yields rise. A country funded by its own savers can lean on them. A country funded by foreigners has to keep them happy. France now pays more to borrow for ten years than the U.S. does, and the U.S. only slipped back under 5% on Thursday. Friday’s story says France’s slide began with a rise in yields around the world. It’s one reason the desk keeps safe money in Treasury bills and floating-rate paper (SGOV in 49 books, USFR in 14) and avoids long duration. France is a watch item for us, not a holding.
Your connection is the international slice of your own portfolio. A Europe stock fund such as VGK (held in 11 books, nothing added) owns French companies. Carrefour’s week shows what unrest can do to a French business. The check this week is simple. Open your international fund’s fact sheet and find the France weight. If you hold a world bond fund, look for France in its top countries too. If either number is bigger than you thought, bring it to a plan review.