On September 8, the French government will face a decisive confidence vote. The uncertain outcome of the vote comes at a time when tensions are already visible on the bond market. French 10-year yields are now trading at the same level as those in Italy, something that has not happened since 2005.
This convergence is highly significant: traditionally, government bonds issued by the French Treasury (OATs) have enjoyed a credibility premium that clearly distinguishes them from Italian BTPs, which are considered riskier. This premium is now disappearing, a sign that investors are beginning to place France in the same category as peripheral issuers. At the same time, the yield spread with the German Bund – which serves as the absolute benchmark for the eurozone – is widening rapidly and heading toward levels reminiscent of the early stages of the sovereign debt crisis.
In other words, the market no longer sees France as a fully-fledged “core zone” country,…
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Original Article: France, the New Weak Link in the Eurozone from GoldBroker.com
Note: This article was auto-fetched from trusted news sources. For educational purposes only. Please verify with official sources before making financial decisions.
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