French Bond Yields Hit 2002 Highs as European Fiscal Worries Deepen

French sovereign debt extended its selloff into a fifth straight week heading into the October 2 session, with yields reaching levels not seen since 2002. The move came alongside weakness in German Bunds, which touched their lowest levels in more than a week, and a separate rout in UK gilts that had earlier dragged Britain's FTSE 100 lower before a modest rebound. Investors have been pricing in growing concern over fiscal positions across major European economies. The bond moves spilled into equities. European shares were on track for their worst week since April as rising yields weighed on valuations across the region. ECB Governing Council member Olli Rehn offered one note of reassurance, saying that rising yields may actually help curb the inflationary impact of expensive energy by tightening financial conditions. What remains unresolved is how far the selloff in French and UK debt can run before it forces a policy response, either from national governments on spending plans or from the ECB on its own stance. For now, the divergence between a battered gilt and OAT market and comparatively calmer Bunds suggests investors are differentiating between fiscal profiles rather than fleeing European debt wholesale.