Boockvar drew his conclusion from the rates on swap contracts that protect against defaults. French bonds are more expensive to insure than government debt from Indonesia and the Philippines, which both have non-investment-grade ratings, as he wrote yesterday in an e-mail.
The CHART OF THE DAY compares the rate on five-year contracts for French government bonds with those for the two emerging markets, according to data compiled by CMA Datavision.
France’s credit-default swap rate was 10 basis points higher than Indonesia’s and 37 basis points higher than the Philippines’ two days ago, based on CMA’s figures. Each basis point amounts to 0.01 percentage point.
The Asian countries were among 14 emerging markets with lower CDS rates than France, as Boockvar noted in the e-mail. Brazil, Colombia, Mexico, Panama and Thailand were among the others. All five have BBB-level ratings, putting them at the lowest end of the investment-grade scale.
France is likely to lose its AAA rating from Standard & Poor’s before its Aaa rating from Moody’s Investors Service is cut, according to Boockvar, who is based in New York. S&P said on Dec. 5 that it was looking at ratings on France and 14 more countries in the euro region for possible reductions. Moody’s took similar action a week later.
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