French bonds: OAT of control

French government bonds, or OATs, are under growing pressure. While rising yields reflect a broader sell-off across European markets, concerns over France’s fiscal trajectory and political uncertainty are driving an additional risk premium.

In this episode of Barclays Brief, host Patrick Coffey is joined by Rohan Khanna, Head of European Rates Strategy, to examine why investors are demanding greater clarity before returning to French debt. They consider how persistent budget deficits, substantial debt issuance and political fragmentation have contributed to the widening OAT-Bund spread, and why the 2027 presidential and parliamentary elections will be critical for market confidence.

Khanna also draws an important distinction for investors: the pressure on French bonds reflects a repricing of France’s fiscal and political risk, not a repeat of the 2011–12 eurozone debt crisis. Looking ahead, attention will turn to whether the next administration will have the willingness and ability to address France’s fiscal trajectory. Until there is greater clarity, volatility may persist and investors could continue to demand a higher risk premium for holding French debt.

Clients can read more on Barclays Live:

• French banks: Standing OAT of the crowd
• Euro Area: Rates Strategy - OAT of the frying pan into the fire
• Macro x Politics: Not just another French election
• Thinking Macro: Three stories. Not one.

Listeners can also explore the topic further:

• US Rates: Higher for longer
• Decoding the bond sell-off
• European rates: Inflation & AI waves collide

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