Historic Shift As French 10-Year Yields Surpass Italy’s
European sovereign debt markets witnessed a seismic shift as France's 10-year borrowing costs eclipsed Italy's for the first time since the debt crisis. The yield on French OATs climbed to 3.48% on September 9, narrowly edging out Italian BTPs at 3.47%. This inversion follows the collapse of the Bayrou government, exposing France's deteriorating fiscal credibility.
Markets are punishing Paris for its unchecked public spending despite record domestic savings. The political vacuum has accelerated capital flight from French debt instruments, forcing the ECB to maintain extraordinary liquidity measures. Fitch's impending rating decision on September 12 looms large, with analysts anticipating a downgrade to A+ that could further erode confidence.
