French-German bond gap widens to eurozone record

11th July 2011, Comments 0 comments

Investors seeking safety from the eurozone debt crisis were moving into German debt instruments on Monday, generating a record gap for 10-year borrowing rates between Germany and France.

In mid-afternoon trading, the yield on the 10-year eurozone benchmark German Bund was 2.706 percent, the lowest level since December 2010. The yield on the French 10-year bond was 3.360 percent.

This so-called differential between the rates or yields on bonds issued by the two countries, the mainstays of the eurozone sovereign debt market, is closely watched on financial markets.

The difference between the indicated rates at which the two countries can borrow rose to 65.6 basis points, or 0.6556 percentage points, from a previous record of 62.8 basis points on March 9, 2009.

The difference is the extra cost to France of borrowing for 10 years compared with the rate at which Germany can borrow.

The yields on 10-year debt issued by Italy and Spain rose to record high levels since the creation of the eurozone.

© 2011 AFP

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