Candriam CIO Warns France's Bond Sell-Off Nears Euro Debt Crisis Levels

Key facts

• Nicolas Forest, CIO of Candriam, warned that France's bond market stress is nearing levels seen during the eurozone debt crisis.
• The spread between French and German 10-year yields rose to 152 basis points on Friday, a level not reached since 2011.
• France's 10-year yield climbed to 4.96% on Thursday, a level unseen since July 2002, then pulled back to approximately 4.92% by Friday.
• Forest said a ratings downgrade in October could intensify pressure on France's debt and ripple across Europe.
• The ECB's Outright Monetary Transactions program could support France, but only if France formally requests it, which Forest deems politically impossible under Jean-Luc Mélenchon or Marine Le Pen.
• France's deficit may approach 6% of GDP this year instead of the forecast 5%, with no convincing consolidation strategy.
• The 10-year U.S. Treasury yield touched 5.34% on Thursday, its highest since 2002, and the U.K.'s 30-year gilt yield crossed 6% for the first time since 1998.
• France's public debt has reached a post-war peak of 119% of GDP, with borrowing plans of a record €340 billion for next year.