The Standard & Poor’s support for the Spanish economy allows the Spanish debt that returns the risk premium at levels of almost two decades ago. According to the Bloomberg agency, the differential between the Spanish debt to 10 years and the German quoted below 55 points before slightly rebound. On the opposite side, investors tightened a little more nuts to France, where the bonus exceeded 3.5%, quoting again above the profitability offered by Italy (3.48%), both with a differential of about 80 points with respect to Germany, the reference of the euro zone.
Although the trend comes from afar, Friday was a day of movements. S&P. Almost at the same time, two decisions that occurred with the market already closed, so this Monday there was expectation to see the reaction of investors, especially if the coup to France generated turbulence. Finally it has not been so. The French bond worsened slightly, but resisted the onslaught without dramatism, implying that the decision was already discounted. In fact, the main stock index in the country, CAC 40, rises more than other large continental squares.
Less expectation generated the review of the Spanish qualification, which resulted in an improvement that did not enter all the pools. But S&P improved the rating more thanks to the most solid economic situation among the great economies of the euro zone. The strong economic growth, the low exposure of exports to the tariffs of the United States, the reduction of foreign debt and the positive impact of immigration on employment are the arguments of the firm. “The Bonds of the Spanish State currently represent an attractive investment opportunity. Although the fiscal context is not exceptional, it remains more solid than that of many other similar countries,” Natixis IM explains from the manager that, on the contrary, prefers to avoid the French debt, more exposed to turbulence.
Friday’s novelties strengthened the rating difference between both economies. For S&P, Spain is AA- and France A+, just a step away. For Fitch is two (from A+ A A-). In the market the Spanish advantage is clear: investors demand from Paris a higher basic points (3.5% compared to 3.25%). And the second economy of the euro still has an uncertain path ahead. It remains to be seen if the fifth prime minister of the country in less than a year and a half is able to generate consensus, the budgetary path does not improve, the French stock market lag lagged, and the ten -year bonus flirts with placing France.
“On paper, France barely offers reasons to arouse the interest of investors,” says Enguerrand Artaz, strategist of the financing of l’échiquier. The analyst, however,. “Markets are born in pessimism, grow in skepticism, mature in optimism and die in euphoria.” And it establishes parallels: “It is worth asking if the last part of this maxim will end up applying sooner than later to US markets, but the first part could perfectly refer to French values.”
That is, it is raised if the valuations have touched the roof in the US, where the main indices are, and have made soil in France. Anticipating when both ends will be reached is complicated, when not impossible, but it is certain that French finances will continue under examination. Credit and DBRS Credit Qualification Agencies must make a decision on France’s note at the end of this month, while Moody’s will make an evaluation in October and S&P in November. A calendar that threatens to continue exhibiting the weakness of France.
Aline Goupil-Raguénès, Ostrum AM strategist, estimates that the country is not on the verge of collapse, with a 1.1% growth in 2024 and a government forecast of 0.7% by 2025, but the high public deficit, 5.8% in 2024, together with political instability, is creating a cocktail of uncertainty. “We have a negative perspective about the spread [prima de riesgo] From France and prefer peripheral countries, given the limited propagation and their best economic foundations, ”he says.
Elisa Belgacem, a senior credit strategist in generali AM, does not expect large short -term financial agitations. “France degradation by Fitch last Friday was largely anticipated, and neutral perspective helps contain short -term concerns.” Now, this new balance is very different from the one before May 2024, when current political instability started. “France is losing its status as a semi -central Pilar, and is now considered peripheral in the eurozone. However, it is not entering a crisis area,” explain Rothschild Am. “The highest risk premium is now the new normality. In fact, it is the risk of a new solution [de la Asamblea] which will weigh again on the French debt, ”they add.
