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A leaked French Treasury memo highlights an alarming fiscal outlook for 2026-2027 driven by spending drift and higher refinancing costs. The analysts expect French OATs to remain tethered to the broader European government bond market for now.

Key Takeaways

• 1.An internal French Treasury memo warns of significant fiscal deterioration, with the 2027 deficit potentially reaching 5.8-6.3% due to social spending drift and interest costs.
• 2.Despite fiscal risks, French OATs should remain anchored to the broader EGB market rather than decoupling, unless political risk or growth-related debt-to-GDP impacts intensify.

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