French Debt: OAT/Bund Spread Jumps to 81 Basis Points, Highest in a Month

OAT at 3.92%: Sharp Rate Increase and Widening Spread

The French 10-year Treasury bond (OAT) is showing a rate of 3.92% this Friday, rising by 13 basis points compared to the previous session. On the other hand, the German Bund, considered the eurozone's « risk-free » benchmark, stands at 3.11%, reflecting a simultaneous increase in European sovereign rates amid ongoing tensions in the bond markets.

The difference between the two bonds is thus 81 basis points, a level that significantly exceeds the 30-day average of 69.8 basis points—an 11.2 basis point rise above this average. The underlying trend over the month is clear: the spread has increased by nearly 22 basis points since its low of 61 basis points on March 9, indicating a continuous deterioration in the perceived risk of French debt compared to German debt.

During the same period, the OAT surged from 3.00% to 3.92%, a nearly 92 basis point increase in less than a month, a movement that mechanically increases the French government's financing costs for new issuances.

High risk premium in a closely monitored budgetary context

A spread of 81 basis points between OAT and Bund means that France borrows at ten years with an added cost of 0.81 percentage points compared to Germany. While this level is far removed from the historical peak recorded on November 17, 2011, during the height of the European sovereign debt crisis, when the differential reached 225 basis points, it does highlight genuine tension amidst a context where French public finances remain under scrutiny: a budget deficit exceeding 6% of GDP in 2024, an uncertain consolidation path, and recurring political debates over finance laws.

This renewed tension arises as European stock markets trade slightly in negative territory this Friday, without any marked panic: the CAC 40 is down 0.86% to 7,702 points, and the SBF 120 is also down 0.86%, while the DAX limits its decline to 0.10%. The absence of a significant stock market sell-off suggests that the rise in bond spreads reflects more of a gradual repricing of French sovereign risk rather than a widespread loss of confidence.

Nonetheless, the signal remains significant: termed « extreme tension » in light of recent levels, the 81 basis point OAT/Bund gap places France in an uncomfortable position relative to its European partners, at a time when the debate on the fiscal sustainability of eurozone member states is intensifying.