1. Skip to content
  2. Skip to main menu
  3. Skip to more DW sites

Debt crisis

January 5, 2012

France successfully raised 7.963 billion euros ($10.23 billion) in new long-term bonds. But concerns about eurozone sovereign debt persist, as the single European currency hits a 16-month low.

https://p.dw.com/p/13esf
piggy bank in Europe's blue with yellow stars
France's bond sale supported its gilt-edged credit rating, for a whileImage: picture-alliance/dpa

In France's first auction of 2012, the country raised 7.963 billion euros in new government treasuries with maturities of between 10 and 30 years. There was solid demand as the sale was nearly twice oversubscribed.

The rate on the benchmark 10-year bond rose to 3.29 percent, up from 3.18 percent during the last long-term bond issue in December.

The French auction was viewed as a key test of market sentiment following a plan by European Union leaders in December, aimed at resolving the sovereign debt crisis in the eurozone.

"The French bond auction saw decent demand, but rising yields showed a deterioration in investor confidence in France's ability to maintain its top-notch credit rating," City Index analyst Joshua Raymond told the AFP news agency.

Credit rating still in doubt

Chancellor angela merkel and president Niicolas Sarkozy of France in front of their national flags
The leadership of chancellor Merkel and President Sarkozy is crucial in the crisisImage: dapd

After the US ratings agency Standard & Poors warned in early December of a mass downgrade of eurozone states due to the bloc's worsening debt crisis, markets have been bracing for France to lose its triple-A rating.

The result of the auction was "nothing to get excited about", Michael Leister, a strategist at DZ Bank in Frankfurt, told Reuters news agency. "But at the same time it should be enough to dispel concerns about France's funding capacity for the time being," he added.

Clouds gathering elsewhere

France met its target of raising at least 7 billion euros from the bond sale. But a sterner test of investor sentiment on sovereign debt in the eurozone is yet to come. Next week, Spain and Italy are due to issue bonds. The two big countries are seen most at risk from the crisis that has already dragged down Greece, Ireland and Portugal.

Stock trader in front of Dax index curve heading south
Stock markets and the euro plunged on Thursday, as traders remain scepticalImage: dapd

On Thursday, Spain compounded fears of a contagion, admitting that the country's banking sector was in need of an extra 50 billion euros to provide for bad loans.

The news from Madrid sent the European single currency to a 16-month low against the dollar on Thursday, while European stocks slid across the board.

"The uncertainty over the sovereign debt crisis remains," said City Index analyst Joshua Raymond. "Alongside fears that key nations such as France could soon lose their triple-A credit rating, this is a constant drag on the euro's prospects."

Author Uwe Hessler (Reuters, dpa, AFP)
Editor: Nicole Goebel