Jean-François Ouvrard (Morgan Stanley): “Even if it is at a higher price, French debt still finds investors on the market”

The 10-year Treasury bond rate (OAT) exceeded the 5% threshold on Wednesday morning, a first since 2002. This year, France is expected to post a deficit of 5.4%. Its debt exceeds 3,500 billion euros and represents 119% of GDP. The government of Sébastien Lecornu aims to reduce the deficit to 5% in the finance bill (PLF) for 2027, but political blockages in the National Assembly make the adoption of a budget quite hypothetical by the end of the year. And this Friday, the rating agency Moody's must decide on France's sovereign rating.

To discuss this unfavorable context, La Tribune spoke with Jean-François Ouvrard, director of economic research for the Europe zone within the investment bank Morgan Stanley.

THE TRIBUNE. The 10-year OAT rate crossed the 5% threshold on Wednesday, the spread between France and Germany exceeded 170 basis points, what explains such a surge?

JEAN-FRANÇOIS OUVRARD. The increase in the spread expresses the financial market's doubts about the sustainability of French debt. Investors focus on big macroeconomic numbers, particularly potential growth and productivity. And they compare them to those of other European countries. Furthermore, the uncertainty linked to political blockages in Parliament also contributes to the rise in rates. Investors have, at this stage, no visibility on how the trajectory of public finances will be corrected in the short and medium term.

Machine-translated from French