French-German bond yield spread widens to 153 basis points on debt concerns, Europe Capital Partners says
TLT•The spread between French and German 10-year government bond yields widened to 153 basis points, a two-year high, as French yields climbed to 4.93% and German yields stood at 3.4%.
1. Yields diverge
French 10-year government bond yields climbed to 4.93%, compared with 3.4% for German Bunds, widening the spread to 153 basis points. The spread more than doubled in a few months and reached a two-year high.
2. Debt concerns
The analysis said investors are demanding a higher risk premium to finance France, adding pressure to strained public finances. It said euro constraints limit independent currency devaluation or inflation-led debt reduction, while political hurdles limit tax increases and fiscal consolidation.
