France Sells Five-Year Notes at Record-Low Borrowing Cost

France sold 7.91 billion euros ($10.3 billion) in debt, with the yield on five-year notes falling to a record low after President Francois Hollande pledged yesterday to cut government spending.

The treasury sold 3.58 billion euros of 2018 debt at an average yield of 0.73 percent, compared with the previous record of 0.76 percent set in November. It also sold 4.33 billion euros of two-year bonds at a yield of 0.24 percent.

The record-low borrowing cost comes the day after Hollande promised to slash government spending by 14 billion euros next year as part of his effort to revive Europe’s second-largest economy before his term in office expires in 2017. The Socialist president said he won’t allow debt to rise to 100 percent of gross domestic product and that keeping the deficit in check is necessary to maintain low borrowing costs.

“Budget seriousness is the condition for credibility,” Hollande said in a speech in Paris. “The progressive return to a balanced budget through spending cuts has to be done.”

France’s debt stood at 90.2 percent of GDP at the close of last year, the national statistics office Insee said last month.

France’s budget deficit will fall to 3.7 percent of gross domestic product this year and 2.9 percent next year from 4.8 percent last year, the finance ministry said yesterday. Hollande aims for a deficit of 0.7 percent in 2017.

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