The Cleaver fell. The degradation on Friday of the sovereign note of France by the Fitch qualification agency occurs at a time when the country’s indebtedness rates have already risen, the financial markets sanction for several weeks the sincere alley of the country.
France establishes a public deficit of 5.4% of GDP in 2025, well above the 3% limit established by the European budget rules, and its debt exceeds 3,300 billion euros, or almost 114% of GDP.
Agencies such as Fitch, Moody’s and S&P global classify the credit quality of the states, or their ability to pay their debt, from AAA (the best score) to D (breach).
These notes are anticipated by investors. A well -qualified state borrows cheaper. A degradation, on the contrary, returns the message of a placement that has become more risky, which can push investors to request a better counterpart to lend money, which increases the cost of financing.
In France, it is the France Treor (AFT) agency that manages the state’s debt and that raises the funds regularly issuing debt titles called state bonds.
We are talking about oatmeal (assimilable treasure bonds) for long -term loans and BTF (Treasury invoices) in the short term.
These titles are placed through an auction, called “auction”, where banks, insurers and pension funds present their offers. AFT selects those that allow you to borrow the amount sought at the best cost.
For investors, these values guarantee regular interest until the reimbursement has been reimbursed once the deadline came.
A rate that jumps
During the last auction at the beginning of September, AFT issued 11 billion euros in debt, including 1.8 billion euros at the expiration of 30 years at a rate of 4.43%, the highest observed since 2008, while AFT expected 3.75%.
It is the reimbursement of these interests that constitutes the burden of debt. Now it represents around 55 billion euros and threatens to become the first expense position in the French state after national education.
Once issued, the obligations circulate freely in the bond market, where they are bought and revealed permanently.
It is this secondary market that reflects in real time the confidence of investors through the cost of the loan of France: if the demand is strong, the rates fall, if it dries, increase.
It is in this market that recently, the French rate at the age of ten has exceeded its Italian equivalent for the first time since the early 2000s, investors who have already taken into account the political and budgetary uncertainty of France.
Source: BFM TV
