Banque de France Governor Emmanuel Moulin warned that France risks being 'strangled by interest rates' if the government fails to clean up public finances. The distress is driven by excessive borrowing and political opposition to reforms, prompting Deutsche Bank economists to lower the European Central Bank's terminal rate projection to between 2.75% and 3% from 3.5%. To curb the contagion, ECB policymakers may pause quantitative tightening.
Wednesday, October 21, 2026
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Franco-German Bond Spread Hits 150bps in Broadening Debt Crisis
Global Markets15 days ago
European markets faced fresh volatility on Monday when debt selloffs moved beyond France into Italy, Belgium, and Greece. The Franco-German 10 year yield spread widened by 10 basis points to 150bps on Monday, after peaking at 160bps on Friday. This followed a disorderly period last week where the spread widened by 32bps to close at 141bps, the largest weekly jump in Bloomberg data going back to 1990.
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