Ten‑year government bond yields in the eurozone’s leading economies have risen above their 2023 peaks and are closing in on the highs recorded in 2007, according to a KB Securities note. By contrast, the U.S. 10‑year Treasury remains above 4.8% but still below its own 2023 peak.
France and Germany are seeing the sharpest yield increases. Both countries are projected to post budget deficits of roughly 5% to 6% of gross domestic product next year, a level that exceeds the European Union’s 3% deficit ceiling. Germany plans to boost borrowing to fund heightened defense spending and infrastructure projects, while France’s fiscal‑tightening agenda has stalled amid political resistance and public push‑back.
Spain and Italy, while also experiencing yield gains, remain below their 2023 peaks and are expected to run narrower deficits of 2% to 3% of GDP, keeping them within the EU’s fiscal‑deficit threshold.
KB Securities draws a parallel with the period preceding the 2011 euro‑zone sovereign debt crisis. After the 2008 global financial shock, yield spreads among member states began to diverge, eventually culminating in a systemic crisis in the second half of 2011. The current decoupling mirrors that earlier pattern, though a crisis has not yet materialised.
The divergence in yields underscores a broader split in fiscal trajectories across the eurozone, with the more indebted core economies facing higher borrowing costs while peripheral nations maintain relatively modest deficit levels. Market participants will be watching upcoming fiscal policy decisions and ECB guidance for signals on whether the yield gap will widen further or stabilise.
