Overview
- Market data showed France’s and Italy’s 10-year borrowing costs at parity around 3.47%, the first such reading in the euro era.
- Intraday moves saw France’s OAT marginally exceed Italy’s BTP, with Italy’s 10-year near 3.51% and the BTP–Bund spread about 85 basis points.
- Investors cite France’s political turmoil after the Bayrou government’s collapse, with fresh street protests planned, as a driver of the repricing.
- Rating reviews begin with Fitch on Friday, followed by DBRS, Scope, Moody’s and S&P in the coming weeks, a sequence markets say could sway funding costs.
- Analysts warn a French debt shock could quickly hit Italy through financial contagion and trade ties, noting a 2024 Italian goods surplus with France of over €12 billion.