French yields are near levels not seen since 2002. Why that could give U.S. Treasurys a boost
HS 09/10/2026
French bond yields have surged to their highest levels since the early 2000s, threatening to roil global financial markets. That could set up U.S. Treasurys for a boost, investors and strategists told CNBC. The yield on the 10-year French note jumped 70 basis points in September and reached 4.9937% in early October — its highest level since July 10, 2002. The risk premium demanded by investors to hold French debt over its German counterpart also reached more than 150 basis points this month — its widest spread in nearly 15 years. The moves echo activity in the bond market during the European debt crisis in the 2010s. Now, contagion could spread to other areas of the euro zone, which could lead global investors to turn to U.S. Treasurys. Europe is giving “the U.S. Treasury market quite a bit of a hand because, what’s going on in France, it’s demonstrating to markets that governments are just not going to be able to close their deficits,” William Lee, chief economist at The Milken Institute, told CNBC’s ” Morning Call ” on Thursday. “So a lot of global investors are coming to U.S. Treasurys” as opposed to European debt. Fiscal, political risks French borrowing costs have jumped amid concerns over its national debt, which has swelled due to tax cuts, spikes in energy costs linked to the Iran war and stagnating economic growth. In France, the budget deficit is on track to make up 5.4% of the country’s gross domestic product on an annual basis. That’s well above the 3% limit set by the European Union. A string of student protests across France has also cast doubt on the country’s ability to rein in its public debt. Protesters in recent weeks have clashed with police to demand their government increase investments in public schools, which have long suffered from staff shortages and infrastructural decay. “Fiscal and political risk remains the main driver” behind French debt becoming more expensive, Eurizon Capital SGR CIO Alessandro Solina told CNBC. Fiscally conservative lawmakers are also in the minority in France and thus lack the necessary power to pass budget cuts, he added. A presidential election in the country slated for next April could further contribute to market jitters. That climate of uncertainty has spurred an exodus from French bonds, in addition to putting pressure other euro zone bonds, per Solina. Yields on German and Dutch bonds last month hit their highest levels since 2011. As of Oct. 8, the Bund yield was hovering around 3.5%, while that of the Dutch 10-year note stood at roughly 3.6%. The Italian bond with the same duration stood at nearly 4.7%, up about 114 basis points from a year earlier. “We need to pay attention to those developments and the way it could spill over to other assets,” Matthieu de Clermont, CIO insurance and regulatory strategies at Allianz Global Investors, told CNBC. As concerns over credit risks shake confidence in the region, U.S. Treasurys could serve as a sort of safe haven, the strategist said. He pointed to the country’s relative economic strength and reputation for consistently repaying its debt. American bonds also offer even more attractive returns than many of their European equivalents, with the yields on the 10- and 30-year U.S. Treasurys sitting at more than 5.2% and 5.6%, respectively. Supply of U.S. Treasurys has also soared this year. US10Y YTD mountain U.S. 10-year yield in 2026 The U.S. has issued $24.6 trillion worth of Treasurys in 2026 through September, up more than 10% on a year-over-year basis, according to data from the Securities Industry and Financial Markets Association, a non-profit trade association for financial institutions. “There’s not enough savings in the U.S. to absorb all those bonds,” Macquarie global FX and rates strategist Thierry Wizman told CNBC. “It’s really a supply and demand issue. … There’s just too much to absorb.” Playing the moves in bond yields Investing around macroeconomic events can pose challenges. However, there are opportunities for investors to get some gains in this market, particularly if they are willing to be patient and hold assets for longer, said Cooper Howard, director of fixed-income research and strategy at Schwab Center for Financial Research. “We think that there’s more of an opportunity with U.S. bonds rather than Euro bonds,” said Cooper Howard, director of fixed-income research and strategy at Schwab Center for Financial Research. “Just one of the reasons for that is, if you look at the yield differentials between the U.S. aggregate bond index, which is kind of a common proxy for the U.S. market, and the U.S. global bond index … that’s about 200 basis points in favor of the U.S.” However, Howard also recommends investors also allocate some funds to international bonds to diversify their portfolios. One way investors can achieve exposure to bonds around the world is through an ETF such as the Vanguard Total World Bond ETF (BNDW) . The fund charges just 0.05% in fees. However, it’s down 4% this year. Banks could also be beneficiaries of the move higher in bond yields, per Solina of Eurizon Capital SGR. But he cautioned that any potential boost to those institutions and their stocks is far from guaranteed. “Banks may benefit from higher net interest income, although this potential advantage can be offset by mark-to-market losses on bond holdings, higher funding costs and deteriorating credit quality,” Solina said. Indeed, the Invesco KBW Bank ETF (KBWB) is down 9% over the past month and is up just 3% in 2026. Giants in the space such as Bank of America , Goldman Sachs and Morgan Stanley are down more than 12% over the past month. The executive added that “real estate, highly leveraged infrastructure and long-duration growth stocks are among the segments most exposed to further yield increases.” — CNBC’s Deena Zaidi and Nick Wells contributed reporting
