French Yields Jump Most Since 2008 on Banks; German Bunds Drop

French bonds slumped, with 10-year yields rising the most since October 2008, amid speculation European nations will need to backstop their banks, placing an additional burden on state finances.

Ten-year French yields climbed 38 basis points this week, the most since the euro was introduced in 1999. The extra yield investors demand to hold 10-year French bonds instead of German bunds also expanded to the most since the euro started. Spain’s 10-year bonds fell for a fifth day after Standard & Poor’s cut the nation’s credit rating. Yields climbed across the euro area after European Central Bank President Jean-Claude Trichet said the ECB will not act as a “lender of last resort.”