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Home News Bond spread between France and Germany highest since euro

Bond spread between France and Germany highest since euro

Published on 17/11/2011

The gaps in borrowing rates on German government bonds and those of France and Spain hit the highest levels on Wednesday since the creation of the euro amid acute strains over eurozone debt.

At 0900 GMT the spread on 10-year French bonds hit 200.6 basis points, or 2.006 percent, shortly before Paris was due to launch a bond sale and amid fears that France will be the next eurozone state to face a debt crisis.

France now has to pay more than twice as much as Germany to borrow for 10 years, even though both carry the top AAA credit rating which France is fighting desperately to retain.

The spread between yields on Spanish 10-year bonds and the German bund hit 489.5 basis points, or 6.649 percent, another record.

France was due to issue between six and seven billion euros in five-year bonds later in the day, and Spain between three and four billion, in a key test of market confidence in eurozone financial management.

President Nicolas Sarkozy is battling to preserve Paris’ “AAA” debt rating, and has begun a programme of austerity measures designed to reassure markets that he is serious about trimming France’s public deficit.

Fellow eurozone governments in Greece and Italy have struggled to cope with their deficits, piling pressure on the single currency, which Sarkozy and his ally Chancellor Angela Merkel of Germany have vowed to defend.