Euro-area government bonds are selling off as oil prices above $90 a barrel, renewed inflation concerns, geopolitical tensions involving Iran and record issuance projections pressure yields. Italy’s 10-year government bond yield reached 4.14%-4.15% on August 31, about 25 basis points above its 3.9% starting level for the month and up from an early-August low near 3.86%. French 10-year OAT yields recently reached approximately 4.11%, briefly overtaking Italian yields in a shift that has focused investor attention on France’s fiscal outlook. The BTP-Bund spread, a measure of Italian risk relative to Germany, narrowed to about 83 basis points as concern shifted toward Paris. France’s public debt stood at 117% of GDP in July 2026, while first-quarter 2026 interest payments exceeded 6 billion euros, up 37% from a year earlier. Political polarization ahead of the 2027 presidential election, structural deficits and higher defense spending are complicating efforts to contain borrowing needs. Barclays forecasts total euro-area bond issuance could reach a record €1.54 trillion in 2027, driven mainly by defense spending. Investors are watching whether Italian 10-year yields stabilize above 4% or move toward levels associated with earlier European debt stress, while France’s 2027 budget process will test its fiscal credibility.