STOCK MARKET WATCH -- Tuesday, 26 June 2012

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41. Hollande Reality Makes French Debt Less Attractive: Euro Credit

http://www.bloomberg.com/news/2012-06-26/hollande-reality-makes-french-debt-less-attractive-euro-credit.html

During his first two weeks in office, President Francois Hollande saw French borrowing costs go in one direction, and that was down. Not anymore.
The yield on the French benchmark 10-year bond advanced to 2.60 percent at 9:25 a.m. in Paris, up from a euro-era low of 2.071 percent on June 1. It was as high as 2.902 percent on May 15, when Hollande took office. The rate is at risk of rising further with French banks vulnerable to the region’s debt-ridden nations as economic growth stalls.

Investors already demand more than 6 percent to buy 10-year Spanish securities and almost as much for similar Italian debt. While Hollande has sought to reassure investors in France’s 1.35 trillion-euro ($1.7 trillion) sovereign debt market by repeatedly pledging to cut France’s budget deficit, the financial turmoil to the south makes his task more difficult.
“France has been out of the spotlight, but once the sheer misery of Spain and Italy is figured in, the next target will be France,” said Bill Blain, a Newedge Group Ltd. strategist in London. “I’m seeing a very small number of international institutional players buying French debt. People are very nervous.”