French bonds buck credit rating blues
Published: 05 Dec 2012 21:43 GMT+01:00
The yield on 10-year French government bonds fell briefly below two percent for the first time ever on Wednesday as investors snapped up what are now seen as safe investment instruments.
In early afternoon trading, the yield on 10-year bonds fell to 1.994 percent in the secondary market, from 2.033 on Tuesday and below the previous record of 2.002 percent set in August.
The rate then eased back up however to 2.003 percent, still a remarkable level for a country with its own public finance problems and which has lost its top credit rating this year from two major agencies, Standard and Poor's and Moody's.
France, which has the second-biggest economy in the eurozone, has benefited from a steady drop in its cost of borrowing, with very short-term treasury
notes even attracting investors at overall negative rates taking into account redemption conditions, which means they were essentially paying to hold the debt.
After Germany, which issues what is considered the safest eurozone debt, France is now seen as a sure place to place funds.
On Wednesday, the benchmark German 10-year Bund was trading on secondary markets with a yield of less than 1.4 percent.
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