Moody's holds steady on France's credit rating as country grapples with turmoil and higher yields

Key points

• Moody's kept France's credit rating at Aa3 but maintained a negative outlook.
• France's 10-year bond yield surpassed 5% for the first time since 2002.
• Over 500,000 people marched last weekend against declining public services and high living costs.

Moody's kept France's credit rating at Aa3 on Friday but held its negative outlook, as the country faced a week of civil unrest and rising political risk. The agency said the negative outlook reflects the increased risk that fragmentation in French politics will keep impairing the functioning of the country's legislative institutions.

Investors had been waiting for the decision as France, the euro zone's second-largest economy, dealt with protests and a sharp jump in bond yields. Moody's said it could return the outlook to stable if French institutions manage to narrow the deficit.

Rising borrowing costs

France's 10-year bond yield passed 5% this week for the first time since 2002, and its spread against German bunds reached a 15-year peak. The country's deficit-to-GDP ratio is about 5.5%, well above the EU's 3% limit. France also faces more than $1 trillion of debt maturing by 2030, and the finance ministry warned a month ago that the debt-to-GDP ratio is expected to reach 121.7% in 2027.

The negative outlook reflects the increased risk that the fragmentation of France's political landscape will continue to impair the functioning of the country's legislative institutions

— Moody's

Protests and downgrades

Last weekend, more than 500,000 people marched to express frustration over declining public services and high living costs. Moody's warned that the political instability, also visible in the current social tensions, risks hampering the government's ability to address challenges such as the elevated fiscal deficit and rising debt burden. S&P Global and Fitch cut their ratings on France in 2025.