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France Sells EU7.84 Billion Debt as Yields Fall to Decade Low

President Francois Hollande
Investor appetite for French debt has risen as President Francois Hollande sticks to his pledge to shrink France’s budget gap. Photographer: Andrew Harrer/Bloomberg

France sold as much as 7.84 billion euros ($9.9 billion) in debt, at the top end of its target, taking advantage of investors’ flight to safety that pushed the country’s borrowing costs to the lowest since 1999.

The country issued 3.48 billion euros in benchmark 10-year bonds at an average yield of 2.46 percent, lower than the 2.96 percent in the last auction on May 3, Agence France-Tresor, the debt-management body, said today. France also sold 685 million euros in 50-year bonds for the first time since 2010.

Investor appetite for French debt has risen as President Francois Hollande sticks to his pledge to shrink France’s budget gap. That has put France -- which was stripped of its AAA rating by Standard & Poor’s in January -- in the league of Europe’s creditworthy north rather than its struggling south.

The yield on France’s benchmark 10-year bond slid last week to an all-time low of 2.07 percent. The yield stood at 2.47 percent after the bond auction today. The spread with equivalent German securities narrowed to 109 basis points from 142 when Hollande took office on May 15.

While the European Commission said May 30 that France may need to take “significant” steps to meet its target of reducing its budget deficit to 3 percent of gross domestic product next year, Hollande has reiterated that he expects to meet that goal and plans to introduce fresh budget measures after the parliamentary elections.

His Finance Minister Pierre Moscovici said yesterday that “it’s a promise that will be kept.”

French bonds, Europe’s second-best performers in May after Dutch debt according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, may extend the rally as investors seek shelter from the region’s crisis.

Spain today sold 2.07 billion euros in debt, more than its 2 billion-euro target, with the amount demanded at 3.29 times the securities offered. That was stronger than the 2.42 times in April.

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