France may have its credit grade lowered by Egan-Jones Ratings Co., because the euro-region’s second largest economy is becoming one of its weakest.
“I believe we’re at A+ and probably heading south” on France’s rating, Sean Egan, the firm’s president and founding principal, said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. A list of Europe’s weaker countries “might extend also to France,” he said. Egan-Jones currently rates France AA-, he said in response to an e-mailed question after the interview.
The additional yield investors receive for holding French 10-year bonds instead of benchmark German bunds jumped to a euro-era record 170 basis points and was at 169 basis points when the market closed at 5 p.m. London time. Yield spreads between the German debt and Austrian and Belgian bonds also reached records today.
Standard & Poor’s said a message was erroneously sent out today to some of its subscribers suggesting France’s top-notch credit rating had been lowered. It affirmed France’s AAA rating.
“As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P’s Global Credit Portal suggesting that France’s credit rating had been changed,” S&P said in a statement. “The ratings on Republic of France remain ‘AAA/A-1+’ with a stable outlook, and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error.”
France is also rated AAA with Moody’s Investors Service and Fitch Ratings.
French bonds were underperforming amid speculation other ratings firms may also lower its ranking, said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “It sounds dubious, but I’m sure it’s more than possible,” he said. France’s “overall debt-to-gross domestic product ratio relative to Germany is horrible.”
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