France is considering issuing more shorter-term debt as investor confidence wanes, with Finance Minister Roland Lescure calling the strategy 'strategic' amid a deepening bond selloff. Long-term borrowing costs have surged to their highest since 2002, driven by political paralysis and fears of a debt spiral. The yield curve has steepened to 1.3 percentage points, with the 10-year yield hitting 4.91% and the 2-year at 3.61%. Lescure noted that while 10-year auctions have gone smoothly, demand for 30-year debt is 'a bit trickier.'
Other nations, including the U.S. under Treasury Secretary Scott Bessent, have also shifted toward shorter maturities and bond buybacks. Analysts cite structural shifts—like reduced demand from pension funds and foreign governments—as key factors. France’s bonds average eight-and-a-half years in maturity, compared to six for U.S. debt. Shorter-term debt, however, carries risks: rates reset faster, and central bank hikes can quickly raise borrowing costs.
Lescure attributed recent volatility partly to the unwinding of carry trades and end-of-quarter portfolio adjustments, denying net sellers were active. The government remains focused on spending cuts through Parliament, though skepticism persists.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing