French government bonds started the session with a slight recovery, but the yield on ten-year bonds remained on the 3% threshold for one Bund spread at a record level for over 10 years. Political instability and government difficulties weigh heavily, which could lead to Michel Barnier losing his post as prime minister.
The Benchmark 10-Year Oat on the secondary market of government bonds MTS is quoting a spread with Germany this morning 85 basis points, which, although down from yesterday when it marked a peak at 90 points base, still remains at the maximum from the eurozone debt crisis of 2011, while just a year ago it was around 50 basis points. The Paris stock exchange also opened slightly positive this morning, but yesterday it saw a slide to its lowest level since early August.
Instead it does Italian spread with Germany trading just above 120 basis points this morning, it has fallen by 50 basis points in the same period: a year ago it was around 170 points a year ago. The yield on the benchmark 3,38-year BTP is down to 3,41%, from 2,99% at the close the day before. The yield on the benchmark OAT is at XNUMX%. France-Italy scissors In one year it has therefore shrunk by around 80 basis points to just 40 points.
Fears for the Barnier government. Armand: ready to make concessions on all issues
Investors are worried about the French market and fear a government crisis, while on the horizon, for all of Europe, there is fear of Trump's tariffs. Far-right leader Marine Le Pen has threatened to overthrow the French coalition government with a vote of no confidence due to a disagreement with Prime Minister Michel Barnier over the proposed budget, which contains measures to cut spending and raise taxes. Finance Minister Antoine Armand said today that the government is ready to make concessions on all issues.
A similar trend had been seen in France. last June, when, surprisingly, Macron called new elections. At that time, the authorities had said they were ready to use all the tools in case of worsening of the situation in France: from the use of the Transmission Protection Instrument (TPI) to the postponement of the Basel 3 rules. And on that occasion, some observers had said that the spread of French government bond yields (OAT) on Bunds could even test the 100 basis points.
The country's main stock index fell yesterday, while French government bonds also fell sharply, pushing the OAT/Bund spread to its highest level since the 2012 eurozone debt crisis.
In Spain the Bono/Byund yield spread is at 73 basis points, down 0,62%, with the 10-year Bono yield at 2,88%.
