French bond pain puts euro zone's weak links on notice
TLT•French 10-year yields topped 5%, their highest in 24 years, while the premium Belgium pays over Germany reached 109 basis points, a 14-year high. Italian yields rose 14 basis points this week to 4.616%.
1. French yields climb
French 10-year bond yields rose above 5%, their highest in 24 years, and their premium over German bonds approached 180 basis points, the widest since 2011. A large fiscal deficit, political stalemate and civil unrest were cited as catalysts.
2. Pressure spreads
Belgium’s 10-year borrowing premium over Germany reached 109 basis points, its highest in 14 years. Belgian borrowing costs rose as much as 12 basis points to 4.54%, while the cost of insuring against Belgian default reached nearly 39 basis points. Italian yields rose 14 basis points this week to 4.616%; an election next year has raised questions about Rome’s plans to reverse its public-debt rise.
