Spread between German, French bonds hits new record

10th November 2011, Comments 0 comments

The spread between German and French 10-year government bond rates touched a historic high of 170 basis points on Thursday amid fears the eurozone debt crisis is spreading fast.

The wide gap in the cost of borrowing between the single currency bloc's two biggest economies reflects worries that France may join Italy and Greece in struggling to fund its debt while German bonds are highly sought after as a safer bet for nervous investors.

The spread hit 170.2 basis points -- 1.702 percentage points -- around 1645 GMT, after having set a record of 164 basis points earlier in the day.

Around 1700 GMT the interest rate or yield on a 10-year French OAT bond was 3.456 percent, up sharply from 3.189 percent on Wednesday, while that of its German equivalent the Bund was also up at 1.776 percent from 1.719 percent.

Cyril Regnat, a bond analyst at Natixis bank, put the new record spreads down to recurrent concerns about France's relative weakness to Germany.

"It's always the same fears, about France's triple A rating, the fragility of banks," he said.

Meanwhile, ratings agency Standard and Poor's said Thursday that it had mistakenly announced to some of its clients that it had downgraded France's top "AAA" credit rating, at a time when many in the markets were speculating on just such a move.

© 2011 AFP

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