French Bond Yield Hits 24-Year High as Fund Risks Draw Focus

France’s 10-year government bond yield approached 4.99% in early October, its highest level in 24 years, as a selloff in European sovereign debt renewed scrutiny of hedge funds’ role in the market.

The rise came amid concerns about France’s public debt and budget deficit, high energy costs and stronger global demand for capital. The extra yield investors demanded to hold French rather than comparable German bonds widened by about 25 basis points over two days.

Market participants said rapid shifts in large funds’ positions may have added to the volatility, but hedge funds’ share of the selloff has not been established. French public finances and inflation were also underlying factors, according to the report.

A European Central Bank study published in 2024 found hedge funds’ share of trading on a major electronic platform for European government bonds rose from 26% in 2018 to 56% in 2023. That figure tracks trading volume on the platform, not ownership of the bonds, and is not a new measure for 2026.

Hedge funds can support trading when banks and traditional investors are less active, but leverage may also force them to close positions quickly during market stress. The ECB and other regulators are monitoring fund activity, leverage and liquidity risks. French yields eased after their early-October peak, while the spread between French and German bonds remains a gauge to watch.