As yield rates for France’s sovereign debt climbs to levels most analysts feel to be unsustainable, the country’s triple A credit rating is firmly in the sights of the major ratings agencies. 10-year French government bonds rose to 3.5 percent as investors demanded an extra premium for the greater risk now associated with French debt.
The yield spread between 10-year French bonds and the benchmark German rate rose to 158 basis points.
In mid-day trading today, the extra yield demanded by investors for 10-year bonds rose to 158 basis points over the benchmark German rate. With yield spreads also widening in other triple-A economies including Austria and the Netherlands, it is evident that the debt crisis is penetrating the very core of the Eurozone.
Of the top-tier countries, France has the greatest debt burden with a debt-to-GDP ratio of 85 percent. It is also estimated that French banks have the greatest overall exposure to the Eurozone’s most indebted nations with just over $900 billion according to the Bank for International Settlements.
Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog.
