After decades of declining global borrowing costs, long-term government bond yields across the developed world are rising. Underlying this trend are ageing populations and deteriorating fiscal trajectories, the exit from near-zero long yields in Japan, a pressing need for rearmament spending in Europe and, increasingly, the private financing demands of the artificial-intelligence investment boom.
Of all the sovereigns facing rising rates, France may face the biggest challenge. Today’s bond market is exposing a French economic problem that has been building for years. France has lost economic ground relative to Germany since about 2010, in a context of Germany’s own weak performance. More strikingly, France has lost…