France now borrows above Italy. Why is Hong Kong's 10-year yield close to 4% with a fraction of the debt?

France now pays more to borrow for ten years than Italy, a country with far more debt. Hong Kong sits at the opposite end of the debt table, yet its 10-year yield is not far from France’s. The two facts have different explanations, and putting them side by side shows how little a debt ratio alone says about borrowing costs.

What is happening in France?

France’s 10-year yield closed at 4.79% on 16 October 2026, 137 basis points above Germany’s 3.42%, according to the daily OAT-Bund table compiled from Banque de France and Bundesbank data. On 2 September the gap was 85 basis points. It widened to 147 on 2 October, the widest in a year, and on that day the 10-year yield touched 4.994% intraday, the highest since 2002 (Boursorama, citing Reuters).

France's 10-year yield (4.79%) minus Germany's (3.42%), close on 16 October 2026. It was 85 bp on 2 September

Italy’s 10-year was about 4.50% on 16 October (Trading Economics), so France was paying roughly 29 basis points more. In July 2025 the order was the other way round, with Italy at 3.47% and France at about 3.25% (Club Patrimoine).

The trigger is the budget. The 2027 budget bill published on 1 October aims to cut the deficit from 5.4% of GDP in 2026 to 5.0% in 2027, with €54 billion of savings and revenue measures (Euronews). Prime Minister Sébastien Lecornu’s government has no majority in the National Assembly, and the first vote on the bill is due on 20 October. This note was written before that vote.

How does Hong Kong compare on the same yardstick?

Each government publishes debt on its own definition, so the comparison below uses a single source: the IMF’s October 2026 World Economic Outlook, which measures general government gross debt and the general government balance as a share of GDP.

Visual guide

How does Hong Kong compare on the same yardstick?

Debt, 2026

• France118.5%
• Italy137.9%
• Germany64.6%
• United States126.8%
• Hong Kong14.1%
• Singapore166.4%

0166.4

Economy	Debt, 2019	Debt, 2026	Budget balance, 2026	Real growth, 2026
France	98.2%	118.5%	−5.4%	0.4%
Italy	133.9%	137.9%	−2.9%	0.8%
Germany	58.3%	64.6%	−4.3%	1.3%
United States	108.8%	126.8%	−8.5%	2.3%
Hong Kong	0.3%	14.1%	−4.4%	3.8%
Singapore	127.7%	166.4%	+3.7%	5.0%

IMF figures for 2026 are estimates and projections. Debt and balance are percentages of GDP.

Hong Kong’s debt ratio is the lowest in the table by a wide margin, and its growth forecast is far above Europe’s. The less familiar number is the deficit. The IMF puts Hong Kong’s 2026 shortfall at 4.4% of GDP, larger than Italy’s and Germany’s. The ratio itself has climbed from almost nothing in 2019 as the government began borrowing to fund capital works, and the IMF projects 15.6% for 2027.

Hong Kong’s 10-year against France’s, on the same days

Date	Hong Kong 10-year	France 10-year	Germany 10-year	US 10-year
2 September 2026	3.538%	4.24%	3.39%	4.79%
2 October 2026	4.021%	4.90%	3.43%	5.28%
15 October 2026	3.996%	4.74%	3.39%	5.10%

Hong Kong: ADB AsianBondsOnline, data from Bloomberg; France and Germany: the OAT-Bund table above; US: US Treasury. Hong Kong’s 16 October figure was not yet published when this note was written, so 15 October is the latest common date.

On 15 October France paid 74 basis points more than Hong Kong over ten years. Hong Kong, with a debt ratio less than a quarter of Germany’s, paid 61 basis points more than Germany.

Subtracting each policy rate tells a different story:

15 October 2026	10-year	Policy rate	10-year minus policy rate
France	4.74%	2.50% (ECB deposit rate)	+2.24 points
United States	5.10%	4.00% (upper end of Fed range)	+1.10 points
Hong Kong	3.996%	4.25% (HKMA Base Rate)	−0.25 points

Using France’s 16 October close of 4.79%, its gap is 2.29 points. France’s long rate is far above the ECB’s policy rate, which is the shape of a market asking for extra compensation. Hong Kong’s is slightly below its Base Rate.

Why Hong Kong’s ratio and its yield go separate ways

The short answer is the Linked Exchange Rate System. With the Hong Kong dollar held between 7.75 and 7.85 per US dollar, local interest rates cannot drift far from US rates for long. The HKMA’s Base Rate is set by formula from the Fed’s target range, and long-term yields move with US Treasuries. From 2 January to 15 October 2026 Hong Kong’s 10-year rose 87 basis points, from 3.122% to 3.996%. The US 10-year rose 91, from 4.19% to 5.10%. Across the three dates in the table above, Hong Kong stayed between 110 and 126 basis points below the US.

France’s case is the reverse. It shares a currency and a central bank with Germany, so the gap between French and German yields is mostly about France itself: its deficit, its debt path and whether a government without a majority can pass a budget. That gap is what widened from 85 to 137 basis points.

In other words, a Hong Kong yield near 4% is mainly an imported US rate, not a verdict on Hong Kong’s public finances. The local fiscal numbers sit alongside it:

• Fiscal reserves were HK$646.5 billion on 31 August 2026, including HK$249.8 billion held as the Future Fund (government financial results).
• In the same release, government debts linked to the Capital Works Reserve Fund (green, infrastructure and Silver Bonds) were HK$455.5 billion. Bonds under the separate Government Bond Programme, with a nominal HK$47.1 billion and US$1 billion, are reported outside that figure. These items are defined differently, so we do not net them against the reserves.
• For the year to 31 March 2026, spending exceeded revenue by HK$92.9 billion before bond money. After HK$156 billion of bond issuance and HK$52 billion of repayments, the Consolidated Account showed a surplus of HK$11.2 billion and reserves ended the year at HK$665.5 billion (provisional results).

That last point explains why the IMF’s −4.4% and local headlines about a surplus can both be true. The government’s Consolidated Account counts bond proceeds and runs on an April-to-March year; the IMF measures general government net lending for the calendar year. The 2026-27 Budget plans an Operating Account surplus each year to 2030-31, a Capital Account deficit financed partly by more bond issuance, and a Consolidated Account surplus in 2028-29.

Credit ratings: France and Hong Kong

Agency	France	Hong Kong
S&P	A+, stable (29 May 2026)	AA+, stable (affirmed 27 May 2025)
Moody’s	Aa3, negative (10 April 2026)	Aa3, stable (outlook raised from negative, 27 May 2025)
Fitch	A+, stable (28 August 2026)	AA-, stable (affirmed 23 May 2025)

France: Agence France Trésor. Hong Kong: the government’s statements on the S&P and Moody’s decisions and the Fitch decision, the latest rating actions we could confirm in an official release. The government restated the same three ratings in its 8 May 2026 bond offering.

Moody’s gives both the same Aa3 but differs on direction. At S&P, Hong Kong is three notches above France. Even so, the higher-rated borrower’s 10-year yield was only 74 basis points lower on 15 October. Ratings describe the risk of not being repaid; in Hong Kong’s case, the yield mostly reflects the price of US money.

What to watch

• Speed. The IMF has Hong Kong’s debt ratio going from 12.1% in 2025 to 14.1% in 2026 and 15.6% in 2027. The level is low; the direction is up, because capital works are funded partly by borrowing.
• Interest. New borrowing is priced at US-linked rates. The 10-year government bond tender on 12 August cleared at an average yield of 3.580%, against a 3.17% coupon on the bond. Another 10-year tender is scheduled for 21 October.
• Growth. The IMF expects 3.8% real growth in 2026, against 0.4% for France. Faster nominal growth makes a given deficit easier to carry.
• Dates. France’s first budget vote is on 20 October. For Hong Kong the next rate-setting event is the Fed’s meeting on 27-28 October, which feeds straight into the Base Rate.

If borrowing costs stay higher for longer, the cost of a goal years away changes too. To try different growth assumptions for an amount you will need later, open the future need calculator.

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