As Bloomberg reports, for market veterans, it's a remarkable development given lower-rated Italy was for years the region's poster-child for fiscal profligacy.

Now it's France that's worrying investors over the size of its deficit, with Prime Minister Francois Bayrou set to resign later Tuesday after losing a confidence vote.

"Expectations for a speedy resolution to France's political and fiscal woes are likely to remain constrained," said Sam Hill, head of markets insights at Lloyds.

Its bonds will remain sensitive to broader market concern over budget deficits and debt piles, he added.

Bayrou's successor will need to find a way to pass a budget in a splintered parliament, an exercise that's toppled the last two prime ministers.

French bonds have been the worst performing in the region since President Emmanuel Macron called a surprise election last year.

We do note that it's not quite apple to apples as a maturity mismatch distorts the comparison between the two nation's yields.

The new French benchmark yield is based on a bond maturing in November 2035, several months after the Italian equivalent. That means the French yield reflects additional duration risk.

Still, it's the latest unwanted market milestone for French officials.

President Macron is expected to name a successor from the center (defined broadly) or with a technocratic profile.

"The expectation is for the next French PM to be a placeholder," said Elliot Hentov, head of macro policy research at State Street Investment Management.

"For investors, the real concern is that the electorate is neither coalescing around a clear majority nor seems particularly concerned with fiscal deterioration."