France's 10-Year Borrowing Costs Surge Against European Benchmarks!
The gap between the 10-year French government bond yield and the 10-year EUR Swap rate, a key benchmark for borrowing costs in Europe, has significantly widened since the recent European elections in France The trend was already "en marche" since S&P recently downgraded France’s credit rating from AA to AA-, following a similar downgrade by Fitch last year. Moody’s has also indicated that the current situation might lead to another downgrade. While other countries like Ireland and Spain have seen their financial health improve, France seems to be facing more challenges. Political uncertainty and reliance on international investors might cause money to leave France, pushing borrowing costs even higher. Higher interest rates on French bonds mean that investors want bigger returns because they see more risk in lending money to France. Japanese investors, who own a lot of French bonds, might start investing more in their own country due to rising interest rates there, reducing demand for French bonds. Additionally, some hedge funds are betting against European government bonds, showing a lack of confidence in the stability of European economies, including France. This trend underscores the growing concerns about France’s economic and political stability in the broader European context. Source: Bloomberg
The traffic light coalition in Germany suffers a historic rout in the European elections.
German Chancellor Scholz’s SPD crashed to 14%, their worst-ever result, falling to 3rd place behind the far-right AfD, exit polls show. The other 2 parties in Scholz’s ruling alliance – the Greens and the FDP – got 12% and 5% respectively. Source: Bloomberg, HolgerZ
FRANCE | *MACRON'S GROUP THRASHED BY FAR-RIGHT LE PEN'S PARTY IN EU VOTE - BBG
*MACRON GROUP HAS 15%-16%, LE PEN'S HAS 32%-33%: POLLSTERS Source: Bloomberg, Le Figaro, C.Barraud
EU Parliamentary elections in France.
In brown where Far-right Le Pen party has won yesterday. Source: Xavier Ruiz
Euro sinks on EU vote and French snap poll.
Common currency falls to lowest in a month. Hedge funds had recently turned net bullish on the Euro. Source: Bloomberg, HolgerZ
France’s bond yield hit the highest level this year on snap election.
10 year French bond yield climbs 11bps to 3.21%. Risk spread over Germany rose to 54bps, highest since January. Source: Bloomberg, HolgerZ
Austria’s hawkish central bank chief Robert Holzmann was the sole dissenter on ECB rate cut, BBG reports, citing a person familiar with the matter.
Source: HolgerZ, Bloomberg
As highlighted by Tavi Costa:
Despite quantitative tightening in most developed economies, their money supply continues to grow substantially, undermining their policies in a significant way. "Today's ECB decision to cut rates highlights how central banks are trapped and forced to reinstate financial repression even as inflation remains higher than historical norms. These policies act as a relief valve to alleviate financial stress, leading to a surge in prices of hard assets with limited supply". Source: Crescat Capital, Bloomberg
