The yield on the French government's benchmark 10-year bond surpassed 5% on Wednesday as investors demanded a higher return for holding the country's debt.
French yields have been rising for weeks as lawmakers wrangle over a 2027 budget that calls for billions of euros in spending cuts to reduce a debt pile that now stands at around 120% of France's GDP - one of the highest levels in the eurozone and well above the EU limit of 60%.
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The French Treasury's OAT bond is also used to set interest rates across a wide swath of the economy, meaning borrowing costs could begin rising for businesses and households.
The last time it was that high was during the dot-com financial crisis.
The spread between the 10-year yield and the German 10-year bond, considered the European benchmark of creditworthiness, also surged to nearly 160 basis points.
The bond selloff puts further pressure on the government ahead of a decision Friday by the ratings agency Moody's on France's sovereign credit rating, with most economists expecting a downgrade that would automatically raise the government's borrowing costs.
Prime Minister Sebastien Lecornu is trying to get a 2027 budget approved in parliament despite not having a political majority for the €43 billion ($48bn) in spending cuts he seeks.
Even if approved, the budget would bring France's deficit down to only 5% of GDP next year, well above the 3% limit for EU members.
Meanwhile, protests over the weekend calling in part for more spending on schools and other public services, degenerated into the worst street violence seen in years.
