When street riots hurt French debt
TLT•Investors are demanding a bigger premium to hold French debt, with the yield gap between French and German government bonds last week reaching levels last seen during the 2011 euro zone debt crisis. A strategist said riots could be linked to rising French debt yields.
1. French debt concerns
Investors are increasingly worried about France’s fiscal trajectory and political situation. The yield gap between French OATs and German Bunds reached levels last week last seen during the euro zone debt crisis in 2011.
2. Riots and bond yields
Thierry Wizman, global forex and rates strategist at Macquarie Group, said a “direct and self-reinforcing causal connection” could be drawn between rising French debt yields and recent street riots. He said traders are likely to react to an intensification of the riots with higher bond yield spreads, while financial stress could encourage the political actors involved.
