France pays more for its debt: its bond yield reaches nearly 5%

WHAT HAPPENED

The yield on France’s 10-year bond rose to nearly 5%. The gap versus the German bond reached 1.53 percentage points, its highest level since October, as investors see more risk in France’s finances.

WHY IT MATTERS

France spends more than it takes in: its deficit is around 5.5% of the economy and its debt is 120%. If it pays more interest, it will have less money for health care, schools, and other services. Banks, pension funds, stock markets, and credit across Europe are feeling the pressure first.

AND FOR YOUR PORTFOLIO

For a long-term investor, this could mean more volatility in European bonds, banks, and stock markets. If the problem spreads, it could also make borrowing more expensive for eurozone governments and companies, although France is not facing a crisis like Greece’s in 2012 today.