France’s top credit grade was affirmed by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings as relative yields on the nation’s debt climb on concern that Europe’s sovereign debt crisis is intensifying.
The outlook on France is stable and its “AAA” ranking is “warranted,” Moritz Kraemer, S&P’s managing director of European sovereign ratings, said Wednesday in a Bloomberg television interview. Francesco Meucci, a spokesman for Moody’s, said in a telephone interview the country’s Aaa grade is “stable.” Fitch spokesman Brian Bertsch said France is rated “AAA” with a stable outlook as per its May 31 statement.
The extra yield investors demand to buy 10-year French debt rather than German bunds, has jumped to 87 basis points, even though both carry triple-A grades from the major rating companies. That spread is almost triple the 2010 average of 33, and compares with 17 in the second half of the previous decade. The cost of insuring French debt rose to a record Wednesday.
French bonds are the most costly “AAA” government securities to insure as investors raise bets that top-rated euro-region nations may be next in the firing line after the U.S. was downgraded by one notch to “AA+” by S&P on Aug. 5. Credit-default swaps on France trade at 175 basis points, more than double the rate to protect German securities at 86 basis points, CMA data show.
Credit swaps pay the buyer face value if a borrower fails to meets its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. (Bloomberg)