The selloff in French bonds may be nearing a turning point, as surging yields begin to draw some investors back in.

Mediolanum International Funds Ltd slightly increased its holdings of French government debt, while Amova Asset Management Co., Ltd. and Aegon Asset Management said they are waiting for buying opportunities, after the yield premium of French 10-year government bonds over the regional safe-haven German bund spiked to nearly 1.6 percentage points, a 14-year high.

"We are much more positive on French government bonds now than we were a month ago," said Steve Williams, global head of fixed income at Japanese investment firm Amova, which manages more than $330 billion in assets. Williams bought French government bonds in July, rebuilding positions he had trimmed during the Iran war. Now, he is "waiting for an opportunity to increase exposure."

Niall Scanlon of Mediolanum said he used the recent selloff to close an underweight position in French government bonds, because "the spread has clearly deviated from fundamentals." However, he is currently "not confident enough" to turn overweight.

There are signs that traders are covering short positions. Eurex data showed that open interest in French government bond futures fell nearly 5% on Monday, one of the largest single-day declines since April 2025.

The French bond market was once regarded as one of the safest bond markets in Europe, but rising French debt and the failure to control spending have sparked concerns, leading to sustained market turbulence. The selloff intensified last week, when a draft budget once again highlighted France's severe fiscal deficit problem, while student-led demonstrations spread across the country. France will also hold a presidential election in April, with far-left and far-right politicians vying for power.

The market got some relief on Tuesday, as far-right presidential candidate Marine Le Pen pledged to cut the fiscal deficit, but some analysts questioned the credibility of her fiscal plan. Yields rebounded on Wednesday, with the 10-year French government bond yield rising more than 16 basis points.

For investors, such violent swings are daunting and make position management more difficult. Irina Kurochkina, a portfolio manager at Aegon Asset Management, said she is waiting for market volatility to ease. "We have been underweight French risk assets for a relatively long time, but I think the buying opportunity may be very close now," Kurochkina said.