French bond turmoil may be helping keep a lid on US borrowing costs.

As investors dumped French government bonds over mounting fiscal and political concerns, they also sought refuge in the relative safety of US Treasurys and German bunds, according to Vishnu Varathan, Mizuho’s head of macro strategy for Asia Pacific.

“The initial response appears to have been running for cover (to the benefit of Bunds and USTs) rather than an outright contagion,” Vishnu wrote in a note on Thursday.

That doesn’t mean Treasury yields are falling. They edged higher overnight, but that demand for safe-haven assets is helping limit their rise, he wrote.

Early on Thursday, the benchmark 10-year Treasury yield traded at 5.3%. France’s 10-year OAT yield stood at 4.9%. Both were near their highest levels since 2002.

France has become the latest flashpoint in a global bond selloff fueled by inflation, higher oil prices, and mounting debt, as investors grow increasingly worried about the country’s public finances.

The AI boom is adding to the pressure, as investors bet that productivity gains will boost economic growth and keep interest rates higher for longer.

Heavy corporate borrowing to fund data centers and other AI infrastructure is also competing with government bonds for investors’ money, pushing yields higher.

Despite the broader pressures, France’s bond turmoil has yet to trigger the kind of widespread contagion that might force the European Central Bank to intervene, Varathan wrote.

Instead, the ECB could slow the pace at which it unwinds its bond purchases to calm markets if conditions worsen.

Varathan also expects government borrowing costs to stay elevated as investors demand greater compensation for the risks of holding long-term debt.

For US Treasurys, the respite may be temporary as America’s own debt burdens and geopolitical risks leave it vulnerable to a similar reckoning.

“Bond vigilantes will simply pick and time their campaigns,” Varathan wrote.