14 Sep 2026

Something just broke in the French bond market.

“Safe” bank bonds now yield less than French government debt. French 10-year covered bonds—secured by ring-fenced pools of mortgages—now offer a lower yield than 10-year sovereign bonds. In other words, markets are pricing a pool of French home loans as safer than the French state itself. Why? France’s public debt has reached 117% of GDP. The government plans a record €310 billion of bond issuance in 2026. Meanwhile, the 10-year yield spread over Germany has widened to 90 basis points—the highest since 2012. This is more than a technical distortion. When government bonds trade at a discount to the bank debt they ultimately backstop, investors are sending a clear message: The sovereign balance sheet has become the risk. Bond markets often discipline governments long before voters do. Source: Kurt S. Altrichter, CRPS

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