Euro: France’s Premium Hits a 15-Year High

Softer US rate bets should have helped the euro, yet it has stayed flat around 1.12 because France is now the bigger worry. The premium investors demand to hold French 10-year bonds over German Bunds, meaning the extra interest France pays compared with Germany, the euro zone’s benchmark borrower, widened to a 15-year high on Thursday. That is the widest since November 2011, during the euro zone debt crisis, Reuters reported. France’s 10-year yield reached its highest level since July 2002, and the gap also widened for Belgium, Italy, Spain and Greece.

There is no easy rescue either. France is under an EU excessive deficit procedure, a formal EU process for countries whose budget deficit is too large, so it may not qualify for the ECB’s Transmission Protection Instrument, the central bank’s emergency tool for calming bond markets. ECB President Christine Lagarde has said the fix for France’s finances must be homegrown, which leaves the euro carrying that risk on its own.