An interesting development over the last couple of days has been the widening of the yield spread between the French and the German 10-year bond yields. Looking at the chart below we see that this spread has widened dramatically over the last two weeks, implying that the market is doubtful about France’s ability to support it is banking sector, which has been facing substantial liquidity concerns. S&P had recently downgraded French bank BNP Paribas amid funding, liquidity concerns. ______________________...
This bears upon the disagreement between Merkel and Sarkozy, with the latter wanting to recapitalize its sick banks through the EFSF rather than through the markets or with sovereign assistance. Should France turn to the markets to raise what is needed to recapitalize its feeble banks, it would certainly loose it triple A credit rating and be a crushing defeat for its diminutive and arrogant leader Sarkozy. The spread between bunds hints at this eventuality.
Eurozone Bailout: Will It Work? [View article]
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This bears upon the disagreement between Merkel and Sarkozy, with the latter wanting to recapitalize its sick banks through the EFSF rather than through the markets or with sovereign assistance. Should France turn to the markets to raise what is needed to recapitalize its feeble banks, it would certainly loose it triple A credit rating and be a crushing defeat for its diminutive and arrogant leader Sarkozy. The spread between bunds hints at this eventuality.