France has announced plans to sell €300 billion ($328 billion) in government bonds in 2025, a significant increase from this year’s €285 billion, to fund its budget amidst ongoing political turmoil, Bloomberg reports.
The announcement comes as France faces pressure to address its struggling fiscal accounts and regain investor confidence following months of market instability.
The bond sales will be used, in part, to finance an estimated €136 billion deficit, which is €31 billion lower than this year’s. Despite political uncertainties, France has managed to sell bonds without major setbacks so far, with recent auctions attracting demand in line with pre-election averages.
However, the increased borrowing target reflects a trend towards heavier reliance on debt. France will face €175 billion in maturing bonds in 2025, a considerable increase from this year’s €155 billion. Total financing needs will reach €307 billion, compared to a revised €319 billion in 2024.
While analysts anticipated a higher bond issuance target due to the larger volume of maturing notes, the figure confirms a significant upward trend in borrowing. It represents an increase of approximately €100 billion compared to pre-pandemic levels. This contrasts with other European countries, which are expected to reduce their bond issuance in 2025.
France’s deficit is projected to rise to 6.1% of GDP this year before falling to 5% in 2025. The government aims to bring the deficit back within the European Union’s limit of 3% by 2029, a two-year delay from the initial plan.
The widening deficit has spurred market anxiety in recent months, pushing borrowing costs higher than other European nations. French debt yields now align with lower-rated Spain and are 77 basis points higher than safer German counterparts.
Despite the concerns, Reinout De Bock, head of European rates strategy at UBS Group AG, suggests the higher issuance target is unlikely to significantly impact French bonds, as it was anticipated. The larger volume of redemptions means the net supply won’t be as heavy, he added.
France’s economic performance will soon be evaluated by the world’s three major credit rating agencies. Fitch Ratings, which downgraded France last year, may issue a new assessment on Friday, followed by Moody’s Ratings on October 25 and S&P Global Ratings a month later.
