France Sells EU8 Billion in Debt in First Hollande Auction

France sold 8 billion euros ($10.2 billion) in bonds, with borrowing costs falling in the first auction after President Francois Hollande took power.

France auctioned the maximum amount targeted by Agence France-Tresor, the debt-management agency, selling two-, three-, four- and five-year securities. The average yield on the September 2014 notes was 0.74 percent, compared with 0.85 percent at the last auction on April 19. On the February 2017 debt, it was 1.72 percent, down from 1.83 percent in the previous sale.

The lower borrowing costs come even as speculation intensifies that Greece may drop out of the single currency more than two years after its budget-deficit blowout triggered a financial crisis across Europe. Greece yesterday said it will hold new elections after President Karolos Papoulias failed to form a ruling coalition, threatening spending cuts required to secure 240 billion euros in bailouts.

Hollande, who was sworn in yesterday as the seventh president of the Fifth Republic, met with German Chancellor Angela Merkel in Berlin, with the leaders of Europe’s two largest economies saying they would consider measures to spur economic growth in Greece as long as voters there committed to the austerity demanded to stay in the euro.

The French debt auction came as spreads, or the yield difference, relative to German bunds widened in several countries in the region. French 10-year bonds fell for a third day before the sale. The spread between French 10-year government bonds and similar-maturity bunds widened to 151 basis points and was at 144 basis points as of 11:08 a.m. in Paris.

Widening Spreads

Spanish and Italian bonds tumbled. The extra yield, or spread, investors demand to hold Spanish 10-year bonds instead of benchmark German debt widened to a euro-era record of more than 5 percentage points.

German 10-year yields approached an all-time low as investors sought safer assets. The country will sell an additional 5 billion euros of its benchmark bund. The according to data compiled by Bloomberg.

France sold 2.505 billion euros of September 2014 notes, 945 million euros of April 2015 bonds, 895 million euros of April 2016 securities and 3.651 billion euros of February 2017 debt.

The country is also selling as much as 1.2 billion euros of inflation-linked debt.

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