BRUSSELS (Euro news) - The yield on 10-year French debt rose to more than 3%, on the first trading day after the credit rating agency unexpectedly cut France’s debt rating.
French debt is once again worrying investors, according to the widening interest rate spread between 10-year bonds of France and the eurozone benchmark, Germany.
France’s borrowing costs surpassed 3.05% on Monday morning, as trading restarted for the first time after one of the biggest credit rating agencies Moody’s downgraded the country in an unexpected move on Saturday.
France’s new long-term issuer rating became Aa3, one step down from the previous Aa2 and the agency changed the country’s outlook from negative to stable. This category aligns with the category France has already been given by the two other main rating agencies.
Moody’s decided to downgrade France’s debt because “the country’s public finances will be substantially weakened over the coming years” as “political fragmentation is more likely to impede meaningful fiscal consolidation,” the agency said in their statement.
On Friday, French President Emmanuel Macron appointed the country’s fourth Prime Minister this year. Centrist François Bayrou follows Michel Barnier on the post, who resigned after his belt-tightening budget earned him and his government a successful no-confidence vote from the National Assembly more than a week before.
The newly forming French government has an urgent task of ensuring that the country has a valid budget for the year ahead.