France sold 7.96 billion euros ($10.2 billion) of debt, with 10-year borrowing costs rising in the country’s first bond auction of the year as credit-rating companies threaten to cut the nation’s AAA grade.
The government sold 4.02 billion euros of the bonds maturing in October 2021 at an average yield of 3.29 percent, from 3.18 percent on Dec. 1. The euro fell to its weakest level against the dollar in 15 months, and the extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened to the most in about six weeks.
“There’s still the threat of a downgrade hanging over France and until we get that situation cleared up you can’t signal the all-clear,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London.
France has the biggest debt burden of the six top-rated euro nations, at 85 percent of gross domestic product. Its 10- year yield spread to German debt widened to a 21-year high of 204 basis points on Nov. 17 amid concern Europe will struggle to contain the region’s debt crisis. Today, it reached 151 basis points, or 1.51 percentage points, the most since Nov. 25. It was at 144 basis points at 2:30 p.m. Paris time compared with a premium of 44 basis points for AAA rated Finland and 37 basis points for the Netherlands.
The 17-nation common currency fell as much as 1.1 percent to $1.2803 as the region’s rescue fund boosted the extra yield it offers over the benchmark rate to sell three-year notes.
