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The surprise announcement from the President of France has sparked reactions in the financial markets this Monday morning. The CAC 40 lost ground, while the financing rate of French debt soared. It remains to be seen if these trends will endure.
The political decision, although mentioned several times in recent months, caught many observers off guard. Announced on the evening of Sunday, June 9, following the results of the European elections, the dissolution of the National Assembly had rapid consequences on the financial markets.The CAC 40 index, which tracks the performance of the 40 largest French companies by market capitalization, plunged 2.39% at the opening of the session. It thus returned to its level from last February. By midday, it was struggling to recover.
If the deterioration of the French rating by Standard & Poor's had no immediate effect on the rates at which France finances itself on the markets, the announcement of the dissolution caused a notable increase in the rate of ten-year bonds (OAT TEC 10), going from 3.06% on Friday, June 7 to 3.20% this morning.This rapid and brutal increase, however, must be put into perspective with the recent history of 10-year OATs. According to the data from the Bank of France, their current level remains close to that reached on May 31 (3.18%). In addition, the threshold of 3.20% was reached or exceeded almost every day between mid-September and the end of November 2023, peaking at 3.47% on October 4.The situation is therefore not unprecedented. The challenge is now to know whether further increases will occur in the coming days, or if the situation will stabilize.
