Debt, deficits, inflation… Pressure on rates is increasing

At first glance, the discrepancy may seem strange. A sharp rise in the Paris Stock Exchange, a declining interest rate spread with Germany: while the National Assembly was preparing to refuse its confidence in François Bayrou on Monday, September 8, the financial markets seemed surprisingly calm or resigned. And for good reason: the announced fall of the government had been widely anticipated by investors , and the debates preceding the vote did not change the situation.

"The markets are telling us both that French political uncertainty is embedded and likely to persist until 2027, but also that the likelihood of a unified political front is very low, meaning that the deficit issue has not been resolved and that uncertainties risk slowing growth," summarizes Kevin Thozet, member of the investment committee of the French asset management company Carmignac.

The next deadline is September 12, with the decision of the rating agency Fitch, which could lower the rating of French sovereign debt. But such a sanction would be largely symbolic, as the judgments of Fitch and its competitors, S&P and Moody's, are considered by investors as ex post facto assessments.

Behind the alarmist remarks of François Bayrou, who, during his press conference on September 25, declared that "our country is in danger because we are on the verge of over-indebtedness" , the financing of the French debt is therefore not threatened: on September 4, the Agence France Trésor, which manages the State's debt, managed to borrow 11 billion euros with maturities ranging from ten to thirty years. It nevertheless had to grant investors significantly higher rates, 3.57% at ten years, compared to 3.17% for a comparable operation in June.

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