The French Bond Market Is on Fire

France's borrowing costs exceed Italy's and Greece's because of its persistent primary deficit and political paralysis, not debt levels alone.

• Yields at 25-year highs: French 10-year borrowing costs neared 5% last week, with the spread over German bunds topping 1.5 points, the widest since 2011; corporate names like L'Oreal and Air Liquide now borrow more cheaply than Paris.
• Primary balance is the tell: Italy runs a primary surplus and borrows cheaper than France despite more debt; France has run a primary deficit every year since 2002 and hasn't balanced its budget since 1974.

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