France's 10-year borrowing cost tops 5% for the first time since 2002 amid budget fight and protests
CNBC connects the bond move to France's budget arithmetic, the EU deficit rules and the government's threat to bypass parliament.
The yield on France's benchmark 10-year bond briefly rose above 5% on October 21, the first time since 2002, before settling just under it, CNBC reports.
The government is trying to pass its 2027 budget through a divided parliament, with Prime Minister Sébastien Lecornu targeting 54 billion euros in spending cuts, while violent protests demanding more spending on education and cost-of-living relief spread over the weekend. France's deficit was 5.1% of GDP at the end of last year; the EU, which has France under its excessive deficit procedure, wants it closer to 3%.
Finance minister Roland Lescure told RTL the government would use Article 49.3 of the constitution, which lets it adopt a bill without a vote, if lawmakers do not agree. Yahoo Finance noted on October 22 that France's 10-year yield was above the U.S. 10-year for the first time since 2013.
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Article 49 of the French Constitution
After exploring French 10-year bond yield hits 5% for first time since 2002 amid unrest, for the "49.3" tool the minister mentioned, read Article 49 of the French Constitution.
Wikipedia explains the article that sets out the government's responsibility to parliament and lets it pass bills without parliament's approval, written to avoid the deadlocks of the Fourth Republic.
Wikipedia · Swim · 30 min
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Bond vigilante
After exploring French 10-year bond yield hits 5% for first time since 2002 amid unrest, the idea of markets disciplining governments has a name: Bond vigilante.
Wikipedia defines a bond vigilante as an investor who sells bonds to protest policies seen as inflationary, pushing yields up; Ed Yardeni coined the term in the 1980s.
Wikipedia · Wade · 5 min
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