How bond investors soured on France

Something unusual is going on in European bond markets. A fortnight ago the yield on French ten-year government debt surpassed that of Spain, suggesting investors see the euro zone’s second-largest economy as riskier than its southern neighbour’s (see chart 1). That is quite the turnaround. In January Spanish yields were 0.4 percentage points higher than their French equivalents; at the worst of the euro-zone crisis, the gap was nearer five full percentage points. French borrowing costs are now well above the levels of Portugal and closer to those of Greece and Italy than they are to Germany’s.