Global bond yields rise sharply

Bond yields around the world are increasing due to a mix of factors, including poor financial management, large investments in artificial intelligence, ongoing inflation, and an energy crisis. These issues are affecting even the most stable economies.

U.S. and French yields hit 5%

The 10-year U.S. Treasury yield exceeded 5% in mid-September. On October 5, the 10-year French government bond yield also reached 5%, the highest level since 2002. This means France now borrows at a higher cost than Italy and Greece.

Investors see risk in French debt

The Wall Street Journal recently described French debt as a "time bomb." The difference in yield between French government bonds and German government bonds has risen to 140 basis points, a level not seen since the European sovereign debt crisis in 2011.

Even stable economies face higher costs

The 10-year German government bond yield has reached 3.6%, up from just over 2% in the spring. This indicates that even countries known for financial stability are experiencing rising borrowing costs.

Fiscal mismanagement worsens the situation

In France and the U.S., poor public finances are a major factor. The U.S. public deficit is close to 6% of GDP, while France's exceeds 5%. Neither government seems to have a clear plan to reduce these deficits.

French budget fails to calm markets

France's 2027 budget aims for a 5.0% GDP deficit, down from 5.4% in 2026. However, this has not reassured investors. Public debt is expected to rise to 121.7% of GDP in 2027, and rising interest rates are increasing the government's costs.

U.S. debt and interest costs are growing

In the U.S., the federal deficit remains close to 6% of GDP, and interest payments now account for more than half of the deficit. Net federal debt has surpassed 100% of GDP and is projected to reach 140% of GDP by the middle of the next decade.

Inflation and AI spending add to the burden

Inflation remains high in the U.S. (3.4% in August) and is accelerating in the eurozone due to rising energy prices. Massive spending on artificial intelligence is also contributing, with major tech companies borrowing heavily to fund AI projects.

AI firms borrow heavily for development

The five major AI companies—Alphabet, Amazon, Meta, Microsoft, and Oracle—have issued about $220 billion in debt since the start of 2026. This is more than double the amount recorded for the entire previous year.

Interest rates may slow in the U.S.

The slowdown in job creation in September may allow the Federal Reserve to pause rate hikes. The interest rate hike in October may not be automatic, according to an analyst at BCA Research.

France faces a challenging debt situation

France's debt situation is concerning, though not yet at the level of a financial crisis. The European Central Bank is unlikely to act quickly, and France must refinance 350 billion euros in 2027 during a presidential election campaign.