What France’s spiking bond yields, rising debt mean for Canadian borrowers

France is currently experiencing high government debt and rising bond yields, causing concern among Canadian investors and borrowers. According to senior economist Vikram Rai at TD Bank, France's government bond yields have risen more sharply than those of other developed economies. The 10-year French government bond, known as the Obligation assimilable du Trésor (OAT), is hovering at close to five per cent, the highest level since 2002.

This is due to growing concerns about political uncertainty, a weak fiscal outlook, and the upcoming French election, which could exacerbate the deficit problem. As a result, the spread between France's and Germany's 10-year yields has increased to over 1.5 per cent, the highest since the euro crisis peaked around 2011/2012. However, France's economic position is different from that of Greece, and the cost of borrowing for Canada may not increase as significantly as in France. Nevertheless, Canadian borrowers may still face higher interest rates as bond yields rise globally.