France leads European bond losses
The French 10-year yield climbed from 4.92% earlier Wednesday and 4.78% at the end of the previous week. German and Italian yields also increased, though the pressure was greatest on France. The extra yield investors demand to hold French rather than German debt widened to a level not seen since 2011.
Speaking to Bloomberg News, Sewing expressed concern that the instability could persist until next year's presidential election. "I wouldn't call it a debt crisis at this point in time, but I think it's a wake up call in particular for all public financing that budget discipline is key," he said.
Protests bring losses for Carrefour
Rioting and looting have intensified concerns about France's ability to repair its finances. The unrest grew out of protests that began in mid-September over school conditions and teacher shortages, then expanded to encompass broader grievances about public services and living costs.
Authorities estimated that about 550,000 people joined nationwide marches on October 17, according to Euronews. Interior Minister Laurent Nuñez reported 2,400 arrests.
Carrefour shares dropped as much as 15% after the supermarket company warned of losses from the disorder. It said roughly 50 stores had been looted over the weekend and forecast an €80 million to €200 million ($90 million to $225 million) reduction in this year's operating profit, AFP reported. The upper end of the warning amounted to £170 million.
Jefferies analysts estimated that the hit could equal as much as 60% of Carrefour's fourth-quarter operating profit. The retailer also lowered its full-year adjusted earnings-per-share outlook: It now expects earnings to be flat or grow slightly, rather than deliver the high single-digit growth previously forecast.
A minority government's budget challenge
Attempts to contain France's debt have stalled amid political deadlock. Fortune reported that public debt had reached a record of about $4 trillion in October, or 119% of GDP. That ratio is the highest since the immediate post-World War II period. The deficit stands at about 5.4% of GDP, compared with the EU's 3% limit.
Prime Minister Sébastien Lecornu's minority government has proposed a 2027 budget that would reduce the deficit to 5% of GDP from 5.4%. The proposal faced its first critical National Assembly vote. France's next presidential election is due in May 2027, and President Emmanuel Macron is ineligible to seek another term.
A nearer-term event for investors is Moody's scheduled October 23 review of France's Aa3 credit rating, which has a negative outlook. According to Euronews, investors were watching the decision as a possible source of additional pressure on French borrowing costs.
UK markets diverge ahead of the Budget
Britain's bond market moved in the opposite direction Wednesday: Yields on 10-year gilts fell, while the pound reached €1.945, its strongest level against the euro in 17 months. Those moves came despite official figures showing UK public debt above £3 trillion for the first time.
Public sector net debt totaled £3.005 trillion in September, equivalent to 94% of GDP, according to The Telegraph, via Yahoo Finance. The government borrowed £24.5 billion that month. Borrowing for the first six months of the 2026/27 financial year reached £97.8 billion, roughly £6 billion more than the Office for Budget Responsibility had forecast.
The same report put September inflation at 3.5%, up from 3.1% in August and the highest in 11 months. Higher fuel costs associated with the Iran war contributed to the increase. September debt-interest spending totaled £10.9 billion, a record for that month in data beginning in 1997.
Chancellor John Healey will present his Budget on October 28. Bond investors will be looking for a credible plan to address the deterioration in Britain's public finances.
