French Prime Minister Sébastien Lecornu vowed the government would unveil its policy response at month-end to the growing protests for increased spending even as investors sell off French bonds.

The result is the current bond rout in France could fester for a while. France's public debt has grown to 120% of its gross domestic product, and bondholders are pressuring the government to cut spending rather than increase it.

Investors, meanwhile, are looking for signs that the fiscal mess upending the French bond market could spark further turmoil in the euro zone.

The protests leaves France in a difficult bind ahead of its spring presidential elections. They raise the prospect the French government offers "expensive concessions" even though rising bond yields make that a less viable economic course, write Macquarie strategists Thierry Wizman and Gareth Berry in a note to clients. The duo see a potential "doom loop" between the protesters and the rise in France's sovereign bond yields.

During the European financial crisis in 2010 to 2013, the European Union pressured Greece, Italy and Spain to slash spending. As yields on sovereign debt rose, it hurt the balance sheet of banks that held it. That sparked capital flight as investors and savers took their money to more stable parts of Europe like Germany and the Netherlands. This "fragmentation" of Europe, the strategists note, is what brought the European Central Bank in to stabilize the situation and save the euro with extreme measures such as bond purchases and joining with the Federal Reserve for currency swap lines to give banks liquidity.

The Macquarie strategists say they didn't see deposit flight from France through August 2026, but the duo is on watch for any sign people are pulling their deposits out. That would be the first indication the European Central Bank could directly intervene to support the French market with liquidity, they say.

Matt Eagan, head of Loomis Sayle's full discretion team and a bond manager, doesn't think Europe is in a crisis situation yet. But he adds, the "yellow lights are flashing." France isn't as vulnerable as the peripheral countries like Greece were during the euro zone crisis, in part because it's almost too big to fail, but its fiscal problem is pernicious, he tells

Eagan is keeping tabs on liquidity, and on auctions for French government bonds. "France mentioned they are thinking of increasing issuance of shorter-maturity debt, which suggests they know that it might be more difficult to build a book of demand for longer-dated issues at a reasonable price," Eagan says. It's a tact many other developed economies, including the U.S. are pursuing of late.

In the near-term, the European Central Bank could help other countries vulnerable to contagion. But he thinks it is too early for the European Central Bank to step in to help France directly.

"I don't think the rest of the euro members would step in directly to help France without concessions from those governing the country, which is uncertain at this point until elections are held," Eagan says.

In the interim, other areas could begin to show strain. Eagan is keeping tabs on French banks, which have held up reasonably well, but will likely feel the heat as the crisis unfolds.

Gavekal analyst Cedric Gemehl doesn't see a repeat of the euro crisis because he thinks Europe will provide a backstop. He thinks the turmoil in Italy in 2018 after electing a populist government could be a better parallel.

That said, he is keeping tabs on whether the prevailing assumptions currently priced into French bonds hold up. At the moment, he says, prices spreads suggest France will hit its 2026 budget target, that there will be some sort of fiscal consolidation in next year's budget and that next year's presidential election doesn't result in a significant weakening in France's public finances.

"If these assumptions hold, they could provide an anchor for French spreads around the current levels," he writes in a note to clients. "But there is a large probability that one or more of these assumptions will prove wrong, which would lead to a further widening in French spreads."