September 26 () –
At 11:00 am, the interest rate on the Spanish 10-year bond was trading at 2.94%, while its French counterpart was trading at 2.947%. This means that long-term Spanish debt is trading at a lower price than French debt for the first time since 2008.
According to market data consulted by Europa Press, the risk premium on the Spanish ten-year bond was provisionally set at 79.4 basis points on Thursday, while the French one was at 80.1 points; a difference of 0.7 points in favour of Spanish debt.
The yield on long-term German bonds, considered the benchmark because they are the safest and offer the lowest profitability (which is why the rest have a risk premium), stood at 2.145%.
The last time that Spanish bonds offered less interest than French bonds for financing was in 2008, with the outbreak of the great financial crisis, which subsequently led to Spanish bonds offering a yield of 7.5% during the debt crisis of 2012. At that time, the Spanish risk premium compared to German bonds was 600 basis points and, compared to French bonds, around 500 points.
It is also worth noting that the yield on the five-year Spanish bond was also below its French counterpart: the Spanish bond was trading at 2.417% and the French bond at 2.48%, while the German bond was trading at 1.96%.
Thus, in this time frame, the Spanish risk premium stood at 45.7 points and the French risk premium at 52.0 points.
French debt has been penalised by investors and its spreads compared to other bonds, such as Spanish bonds, have been narrowing as a result of volatility in the political arena and the state of health of the French public accounts.
Specifically, this gap with respect to the Spanish bond has been diluted since the early holding of legislative elections on June 9, which resulted in a parliamentary arc marked by fragmentation and the impossibility of generating stable majorities.
This week, the gap has narrowed even further with the formation of a government led by conservative Michel Barnier, while the Minister of the Economy, Antoine Armand, admitted in an interview with public radio that the current public deficit is one of the worst in history.
Investors are also motivated by possible downward revisions of the French government’s credit rating by the main agencies in the coming weeks.
Elsewhere, the Italian 10-year bond yield was trading at 3.473%, the Greek 3.103% and the Portuguese 2.713%.
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