France plans record bond sales in 2027 as COVID-era debt comes due

The French government will sell ‌a ​record amount of bonds to investors next year as it faces a surge in COVID-era debt due for redemption and needing to be refinanced, the public debt ‌management office said on Tuesday. Agence France Tresor (AFT) said it plans to issue €340 billion ($385.7 billion) of medium and long-term bonds next year, net of buybacks, up from €310 billion this year.

AFT will have to offload the record amount into an increasingly ‌jittery bond market as concerns about France's strained public finances and uncertainty about its presidential election next year have ‌sent borrowing costs spiralling higher. The government is to present its 2027 finance bill to France's deeply divided parliament on Thursday, kicking off a particularly perilous budget season as opposition parties harden their positions ahead of the two-round April-May election.

REFINANCING BUMP The premium France pays over comparable ⁠German ​bonds reached its highest since 2012 ⁠on Tuesday, having surged in recent days after the government acknowledged its 2026 deficit target had slipped out of reach and amid a ⁠broader global bond selloff.

AFT said the state's financing requirement would increase by €28 billion next year as the amount of bonds ​coming due for redemption increases by €19.4 billion to a record €189.2 billion. France's hundreds of billions of euros of cheap ⁠COVID-era debt will need to be refinanced at far higher rates, making debt servicing costs the biggest single expense on the state's budget.

HIGHER RATES The ⁠stock ​of outstanding Treasury bills, generally used to give the state flexibility in managing short-term cashflow, was expected to rise by €2.2 billion next year.

AFT said it had pencilled in expectations for a rate of 3.0% on its three-month ⁠Treasury bills next year, up from 2.7% currently on the market, while its 10-year benchmark bonds were seen easing ⁠to 4.3% by the ⁠end of 2027, down from 4.8% currently — the highest since the global financial crisis in 2008. The increasing borrowing costs mean that debt servicing would represent a budget expense of €72.9 billion ‌next year, up from €62.6 ‌billion this year, AFT said.

($1 = 0.8814 euros)