(Wall Street Journal) — France is considering boosting issuance of shorter-term debt, as investors grow more hesitant to lend to the debt-laden country for longer periods.

In an interview, Finance Minister Roland Lescure said France would be “strategic” in issuing new debt at a time when demand from investors has been rattled by the country’s deepening financial woes.

A monthslong selloff in French government bonds has accelerated in recent weeks, sending long-term borrowing costs toward their highest level since 2002. Investors are concerned that political paralysis is making it impossible for the country to rein in public spending. Lescure on Tuesday pledged to force spending cuts through Parliament, but that hasn’t quelled fears that the country is heading for a debt spiral.

France’s yield curve, or the gap between its 2- and 10-year government bond yields, has steepened to about 1.3 percentage points. The widening gap means that France’s longer-term borrowing costs are rising faster than its shorter-term ones. The 10-year yield rose to 4.91% on Wednesday, while its 2-year yield climbed to 3.61%.

“The reasonable thing to do considering the value in the curve, which I see, would lead us to have a shorter maturity,” Lescure said. “But it’s at the margin. We’re not traders.”

Other countries including the U.S. and U.K. have also shifted to issuing more shorter-term debt in recent years. The U.S., under Treasury Secretary Scott Bessent, has also been buying back long-term bonds to bring down yields.

Analysts say structural changes in demand — such as a retreat by once-steady buyers like pension funds and foreign governments — are partly to blame for waning demand for longer-term debt. But investors have also started to demand more compensation for the risk of lending to some governments, particularly those with high debt levels.

France’s government bonds have relatively long maturities, with an average life of eight-and-a-half years. That compares with about six years for U.S. government debt.

Lescure said a recent auction of 10-year bonds went smoothly, but demand for 30-year debt is “a bit trickier at the moment.”

Shifting to shorter-term debt carries risks. Governments’ borrowing costs reset more frequently, so spikes in interest rates feed through to their interest bills faster.

And the relationship between short- and long-term borrowing costs can reverse. Shorter-term debt more closely tracks central-bank rates. In the high-inflation period between 2022 and 2024, shorter-term borrowing costs surged above longer-term ones as central banks raised rates to contain inflation.

Some analysts have blamed the recent turmoil in French debt markets on the unwinding of hedge-fund bets that had grown popular in recent months. Lescure said “there was probably some unfolding of carry trades” — a reference to bets investors make on bonds using borrowed money.

Lescure said he doesn’t believe there was a specific trigger for the selloff, though he added that adjustments investors often make around the end of the quarter could have played a role.

“It’s no surprise that at the end of the quarter, there’s spikes one way or another because people want to look good, people want to hedge their losses,” Lescure said. “But we didn’t feel there were net sellers.”

Write to Chelsey Dulaney at chelsey.dulaney@wsj.com and Stacy Meichtry at Stacy.Meichtry@wsj.com

(END) Dow Jones Newswires