France now pays more than Italy to borrow. Where does Malaysia stand on debt, yields and ratings?

France now pays more to borrow for ten years than Italy, the country that spent two decades as the euro area’s shorthand for fiscal risk. Malaysia makes a useful contrast: less debt than France, lower credit ratings, and lower bond yields. Those three facts do not line up neatly, and the reasons are worth separating.

What is happening in France?

French borrowing costs have jumped since early September. The 10-year yield closed at 4.79% on 16 October 2026, 137 basis points above Germany’s, on daily Banque de France and Bundesbank data compiled by ideal-investisseur. The gap was 85 bp on 2 September and reached 147 bp on 2 October, its widest in a year.

Intraday high of the French 10-year yield on 2 October 2026, the highest since 2002 (Reuters via Boursorama). It closed that day at 4.90%.

Visual guide

What is happening in France?

Germany 10-year

• 2 September 20263.39%
• 2 October 20263.43%
• 16 October 20263.42%

03.43

Date	France 10-year	Germany 10-year	Gap
2 September 2026	4.24%	3.39%	85 bp
2 October 2026	4.90%	3.43%	147 bp
16 October 2026	4.79%	3.42%	137 bp

Italy’s 10-year was around 4.50% on 16 October (Trading Economics), so France pays roughly 0.3 points more. The pressure centres on the 2027 budget. Prime Minister Sébastien Lecornu’s government proposes to cut the deficit from 5.4% of GDP this year to 5.0% next year (Euronews), without a majority in the National Assembly. The first vote is on 20 October; every figure here predates it.

How does Malaysia’s debt compare on the same yardstick?

On the IMF’s October 2026 estimates, Malaysia’s debt ratio is a little above Germany’s and far below France’s or Italy’s. One source is used for every country because national definitions differ.

General government, % of GDP	Debt 2019	Debt 2026	Change	Fiscal balance 2026	Real growth 2026
France	98.2	118.5	+20.3	−5.4	0.4
Italy	133.9	137.9	+4.0	−2.9	0.8
Germany	58.3	64.6	+6.3	−4.3	1.3
Malaysia	57.1	69.2	+12.1	−3.5	5.2
Thailand	41.1	67.2	+26.1	−3.3	2.1
Indonesia	30.6	41.7	+11.1	−2.9	5.1

Source: IMF World Economic Outlook, October 2026 (debt, balance, growth). 2026 values are IMF estimates; change is a CapsWindow calculation.

Two things stand out. Malaysia’s deficit is smaller than France’s or Germany’s, and its growth rate is several times higher than any of the three European economies. But its debt ratio has risen faster since 2019 than Germany’s or Italy’s. Malaysia sits in the middle, not at the safe end.

The Ministry of Finance publishes a narrower figure. Federal government debt was RM1,378.9 billion, or 63.1% of GDP, at end-June 2026, down from 65.2% at end-2025 (Fiscal Outlook 2027, Section 4). It covers the federal government only, so it should not be placed in the IMF table.

How do Malaysian and French bond yields compare?

The 10-year Malaysian Government Securities yield closed at 3.83% on 16 October 2026, 96 bp below France on the same day. The Malaysian figure is Bank Negara’s benchmark closing yield for the MGS maturing in July 2035 (BNM).

Date	Malaysia 10-year MGS	France 10-year	France minus Malaysia
2 September 2026	3.93%	4.24%	+31 bp
2 October 2026	4.00%	4.90%	+90 bp
16 October 2026	3.83%	4.79%	+96 bp

Between 2 September and 16 October the French yield rose 55 bp, the German yield 3 bp, and the Malaysian yield fell 10 bp. The MGS yield was around 4% at the turn of the month and eased in mid-October; this note does not tie that move to a single cause.

Subtracting each policy rate takes out the part of the yield that simply reflects the central bank’s setting.

16 October 2026	10-year yield	Policy rate	10-year minus policy rate
Malaysia	3.83%	2.75% (OPR)	+1.08 points
France	4.79%	2.50% (ECB deposit rate)	+2.29 points
Germany	3.42%	2.50% (ECB deposit rate)	+0.92 points
Italy	about 4.50%	2.50% (ECB deposit rate)	about +2.00 points

The ECB’s rate is lower than the OPR, yet France’s long yield is about a point higher than Malaysia’s. Malaysia’s margin over its policy rate is close to Germany’s; France’s is more than double. That margin is where a fiscal and political premium shows up. Bank Negara held the OPR at 2.75% at all five of its 2026 meetings (BNM, 3 September 2026).

Why do Malaysia’s debt ratio and its yield tell different stories?

Largely because of who lends to the government, and in which currency. The Ministry of Finance’s end-June 2026 tables (Fiscal Outlook 2027, Section 4) show:

• Own currency. 98.8% of federal debt is domestic. Offshore borrowing is 1.2%, or RM16.7 billion, against a statutory ceiling of RM35 billion.
• Domestic institutions. Residents hold RM1,082.6 billion, or 78.5% of federal debt. The Employees Provident Fund alone holds 30.5%, banks 28.5%, insurers 5.2% and Bank Negara 3.8%. Non-residents hold 21.5%.
• The French contrast. Non-residents held 57.5% of France’s negotiable state debt in the first quarter of 2026 (AFT monthly bulletin, Banque de France data). The definitions and dates differ from Malaysia’s, but the gap in who holds the bonds is wide.

Share of Malaysia's federal government debt held by residents at end-June 2026 (Ministry of Finance, Fiscal Outlook 2027, Table 4.4)

Moody’s drew the same link when it kept Malaysia at A3 in July: in the ministry’s summary, the “large domestic investor base” helps “keep borrowing costs at moderate levels” (MOF, 14 July 2026). Inflation also differs: 1.9% in Malaysia in August against 3.8% in the euro area’s September flash estimate. Faster growth makes a debt ratio easier to hold steady.

A captive domestic market has another side. The EPF’s RM420.8 billion of federal debt means members’ retirement savings and government borrowing are closely tied. Domestic funding lowers the risk of a sudden buyers’ strike; it does not make the debt free.

Malaysia also has a legal ceiling. Under the Loan (Local) Act 1959 and the Government Funding Act 1983, total MGS, MGII and MITB may not exceed 65% of GDP; at end-June 2026 they stood at 62.1% (Table 4.2 of the same document). The Public Finance and Fiscal Responsibility Act 2023 adds a medium-term threshold of 60% for federal debt.

How do the credit ratings compare?

Malaysia is rated two to three notches below France at each of the three large agencies.

Agency	France	Malaysia	Difference
S&P	A+, stable (29 May 2026)	A-, stable (29 September 2026)	2 notches
Moody’s	Aa3, negative (10 April 2026)	A3, stable (14 July 2026)	3 notches
Fitch	A+, stable (28 August 2026)	BBB+, stable (9 December 2025)	3 notches

Sources: Agence France Trésor; Malaysian Ministry of Finance press releases for S&P, Moody’s and Fitch. Malaysian dates are the ministry’s release dates. No 2026 Fitch action on Malaysia was found, so December 2025 is the latest confirmed.

A lower rating with a lower yield is not a contradiction. A rating compares the risk of non-payment across countries and currencies. A yield is a price in one currency, and it absorbs inflation, the policy rate and the depth of the local buyer base. A ringgit yield and a euro yield do not say directly which borrower is safer. The direction of travel differs too: Moody’s has France on negative outlook, while all three agencies have Malaysia on stable.

Which Malaysian numbers are worth watching?

Three, covering speed, interest and growth:

• Speed of debt. The ministry’s federal debt ratio fell from 65.2% at end-2025 to 63.1% at end-June 2026. The IMF’s broader measure moves from 70.5% in 2025 to 69.2% in 2026 and 68.8% in 2027. Headroom under the 65% statutory limit was 2.9 points at end-June.
• Interest. Debt service charges are estimated at RM57.3 billion in 2026, 15.8% of federal revenue (2025: 16%), with an average cost of debt of 4.05%. In France, central government debt charges are 19.2% of net revenue (Reuters, 12 October 2026); the definitions differ.
• Growth and the deficit. The IMF puts growth at 5.2% in 2026 and 4.6% in 2027. The federal deficit target has been revised from 3.5% to 3.6% of GDP for 2026, with 3.3% planned for 2027 (Fiscal Outlook 2027, Section 1).

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