Debt: the gap between French and German borrowing rates experienced its sharpest decline since 2020 on Monday

The gap between French and German ten-year borrowing rates, a barometer of investor confidence in France's debt, recorded on Monday its biggest drop in one session since March 2020, after the country's rating was maintained by the Moody's agency. This gap between French and German ten-year borrowing rates, which measures the extra required by investors to lend to France rather than to Germany, considered the safest borrower in the euro zone, fell by around 0.14 percentage points, to 1.53 points, according to Bloomberg data. It reached 1.74 points at the close last week, and up to 1.78 points during the session, its highest level since 2011.

“Moody's decision somewhat tempers concerns about the French budget and the cost of financing,” commented Guillaume Chaloin, director of equity management at Delubac AM. » READ ALSO - Insuring the French debt costs twice as much as a year ago A note which remains under threat of a downgrade The French ten-year borrowing rate has fallen back below the symbolic bar of 5%, to 4.90%, compared to 5.02% on Friday. It exceeded this threshold last week for the first time since 2002.

The German rate for the same maturity remained almost stable, at 3.37%. The Moody's agency maintained France's rating at Aa3 on Friday evening, an assessment of the country's ability to repay its debt, while a downgrade was widely expected. However, it retained a negative outlook, which raises the threat of a deterioration.

Moody's explains that its Aa3 rating, which characterizes “good quality” debt, “is based on the assumption that a 2027 budget reducing the public deficit will be adopted, while (...) social tensions will moderate somewhat in the coming months”. Its competitors Fitch and S&P have for several months classified France in A+ (higher average quality debt).

Machine-translated from French