Full Breakdown
France to Issue Record €340 billion of Bonds in 2027 to Refinance Covid-Era Debt
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Core Event: Record Borrowing Plan
France’s public debt management agency, the Agence France Trésor (AFT), announced that the government will issue €340 billion of bonds in 2027. The amount exceeds the 2026 issuance by roughly €28 billion and is intended to finance ongoing public spending while refinancing debt that matured during the Covid-19 pandemic. The issuance will comprise a mix of medium- and long-term securities.
Fiscal Context and Deficit Pressures
The French public deficit stood at 5.1 % of gross domestic product (GDP) last year and is now projected to rise to 5.4 % this year, well above the European Union’s 3 % ceiling. Persistent shortfalls between revenue and spending have limited the government’s ability to lower the deficit as originally planned, prompting concerns among investors about the sustainability of France’s fiscal trajectory.
Market Conditions and Interest-Rate Outlook
AFT forecasts a 4.3 % yield for France’s 10-year bonds in 2027. In secondary trading, 10-year French bonds are currently yielding about 4.8 %, a level not seen since the global financial crisis. The rise in yields reflects heightened investor wariness over the size of the debt stock and the government’s deficit outlook.
Official Response
Prime Minister Sébastien Lecornu, speaking earlier this month, pledged to reduce the deficit in the coming year without resorting to austerity measures. He emphasized that the upcoming presidential election, scheduled for a few months away, will make fiscal consolidation politically challenging.
Potential Implications
Higher borrowing costs mean a larger share of the budget must be allocated to interest payments, leaving fewer resources for current public programs. The record issuance also raises questions about France’s ability to meet EU deficit rules and may intensify political pressure ahead of the election cycle.