Markets are treating France more like Italy, a rare occurrence demanding explanation. In August, the 30-year Italian BTP yield fell 0.01 percentage points below the French OAT, suggesting investors are reassessing French political risk ahead of an October budget and spring presidential election. France's fiscal position is long-standing, having overshot the euro zone's deficit rule over 20 times since the currency's birth.

Its debt-to-GDP ratio has been above limits since 2003. French yields are currently similar to levels seen during the 2009-2012 sovereign debt crisis. However, the primary concern is the widening spread between French OATs and German Bunds.

The 10-year spread is currently about 0.87 percentage points, roughly 0.4 points above the average since Mario Draghi's 2012 "whatever it takes" speech. This widening places spreads in the 99.8th percentile since that declaration. Historically, the closest France came to a debt reckoning was 2011, when spreads hit 1.89 percentage points, though the country avoided crisis partly due to being a "middle child" neglected while markets focused on other issues.

The crucial difference now is the European Central Bank's backing. Draghi's pledge established monetary union as a political project, with Outright Monetary Transactions and the Transmission Protection Instrument serving as potential tools, though their use for political risk in a core country would be controversial. A key vulnerability is France's investor base; over 60% of its debt is held by foreign investors, compared to about a third for Italy.

ABN Amro's Larissa de Barros Fritz estimates 35% of OAT holders are price sensitive, meaning small sell-offs could pressure yields upward.