Despite Fitch’s sanction, markets remain impassive. This Monday, the interest rate of which France borrowed at 10 years in the markets was approximately 3.50%, the same level as on Friday night at the end, before the American agency’s decision to degrade the aa-à a+hexagon note. The gap with that of Germany reached 0.80 percentage points, against 0.79 points at the end of last week.
Fitch motivated his choice due to persistent political instability and budgetary uncertainties that contradict the sanitation of their public accounts in an unfortunate state.
The lack of reaction in the bond market is not surprising in reality since investors had already integrated this degradation: “Often, the impact of a degradation is insignificant because investors in the markets were already aware of the problems of the country in question and already took into account to determine the required interest rate on their obligations,” confirmed last week, the Doric Dor, director of economic studies in the Isege Scholation.
In addition, the markets have not waited for Fitch to sanction France whose bond rates have increased since the dissolution of July 2024. To the point that France today takes more expensive than Spain, Portugal and Greece already rates close to those of Italy.
“There is nothing dramatic”
Some, despite everything, feared that the loss of “double A” leads to a decrease in the demand for French bonds, certain funds that limit the arrest of sovereign bonds whose note is less than “AA”. But “the true barrier for the funds is generally between ‘simple A’ and ‘Triple B’. We are still far from that since Fitch, even if it has degraded us, maintains a stable perspective. (…)”, observes on the BFM Wilfrid Galand business, deputy general director Montpensier-Arbebel.
This is what makes it say that “there is nothing dramatic today. We must take it as a signal. We are still in good debt quality, so we do not have shock to predict in the markets.”
The expert also believes that “so that there is an impact, it is often necessary to” have the decision of “two qualification agencies in three” and “S&P must have spoken because S&P is a bit of the absolute barometer, the standard, is the largest qualification agency.” On the contrary, “Fitch is the least important of the three most important.” The other two agencies, namely Moody’s and S&P, will respectively check the tricolor debt note on November 24 and 28.
Economists warn, however, France: if the political and fiscal crisis was led to time, which complicates the recovery of public finances, investors could lose patience: “national and foreign buyers have an objective vision of the situation. There is no reason for markets not to sanction us” in the long term, he explained to the BFM business Alexandre Baradez, “this situation requires a guard Real”. “..
Source: BFM TV
