If you are worried about spiking U.S. bond yields, spare a thought for France.

Borrowing costs for the Continent's No. 2 economy surged past Italy's and Greece's this summer. Investors' key metric, French yields' spread over frugal neighbor Germany's, has marched upward toward the psychological landmark of a full percentage point.

"The tolerance of the market has maybe reached a threshold," says Mabrouk Chetouane, head of global market strategy at Paris-based Natixis Investment Managers.

Reasons aren't hard to divine. France is running a 5%-of-gross-domestic-product budget deficit, with prospects of consolidation faint at least until presidential elections next April. Outgoing President Emmanuel Macron's best shot, raising the pension age from 62 to 64, was "postponed" after he lost control of Parliament. Marine Le Pen, who is leading the 2027 polls, wants to reduce it to 60 and slash taxes on fuel and electricity.

France already spends more on debt service than public education, notes Brigitte Granville, professor of international economics at Queen Mary University of London. "The situation is becoming more and more unsustainable," she says.

Runaway deficits enabled by political gridlock may sound familiar to U.S. voters. France has additional headaches, though. Its tax take is already among the highest in the developed world at 43.5% of GDP, Granville says. The U.S. is about 25%. Foreign investors own 57% of French sovereign bonds, Chetouane notes, increasing risks of an exit stampede. The U.S. number is about 40%. France will eke out 0.5% growth at best this year, while the U.S. maintains 2%-ish.

What the two economies have in common is being too big to fail without a cataclysm that few want to contemplate. "If they let France collapse, the euro would collapse," Granville says.

So, eyes are turning toward the European Central Bank and its as-yet untested Transmission Protection Instrument. This empowers the ECB to buy constituent states' bonds "to counter unwarranted, disorderly market dynamics."

"It's kind of a nuclear solution to avoid a repeat of 2012," Chetouane says, referring to the soaring bond yields across southern Europe that followed Greece's debt default. The trigger to watch for TPI activation is spreads of French debt over German government bonds approaching 1.5 percentage points, he predicts.

France could still pull itself together if next year's elections produce a working majority. "Spreads are still a lot lower than where Italy's or Spain's were in the 2010s crisis," notes Steven Kamin, a senior fellow for international macroeconomics at the American Enterprise Institute.

Italian Prime Minister Giorgia Meloni, Le Pen's ideological sister of sorts on the European far right, has set a good example over the past four years, slashing deficits from 7% to 3% of GDP while staying popular enough to head her country's longest-sitting government since World War II.

French 10-year sovereign yields at 4.5%, a few basis points above their current level, might in fact represent an "entry point" for buying, Chetouane says.

That would be a cautious toe in, not betting the farm, he qualifies. France is fated to another year or so of political drift as legislative elections follow the presidential poll, Chetouane says.

While Le Pen has dropped earlier calls to pull Paris out of the European Union and euro zone, her promise of sharp contribution cuts and other reforms could challenge an already fragile Continental economy. "It's very far from a slam dunk that the election will lead to improvement," Kamin concludes.

Corrections & Amplifications

French 10-year sovereign yields at 4.5% are a few basis points above their current level. An earlier version of this article incorrectly said they were 25% basis points higher.

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