PARIS (Reuters) – The yield on the 10-year OAT rose above its Spanish equivalent for the first time since 2008 on Tuesday morning, as investors worried about France’s large public deficit.
The spread between the yield on French sovereign bonds and the yield on Spanish bonds briefly turned negative at 08:26 GMT, before returning to positive territory.
The two yields, which measure the premium that investors demand to hold these securities and which increase when the price of the sovereign security falls, reached 2.977% for the French security and 2.991% for the Spanish security at 09:38 GMT.
Investors are concerned about the size of the French public deficit, which could reach 6% this year if nothing is done.
“Prime Minister (Michel) Barnier presented his government over the weekend and, given the criticism he has received, some doubt whether it will last,” adds Benjamin Schroeder, rates strategist at ING.
The deterioration of economic conditions in France, highlighted by the latest PMI indicators, also complicates efforts to reduce debt.
By comparison, Spanish Economy Minister Carlos Cuerpo said Monday that Madrid would raise the country’s economic growth forecast to 2.7% from the current 2.4%.
(Written by Corentin Chappron, edited by Claude Chendjou)
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