Bloomberg News

Spain Joins France to Seek $18 Billion in Bonds

April 19, 2012

A crumpled five euro note. Photographer: Simon Dawson/Bloomberg

A crumpled five euro note. Photographer: Simon Dawson/Bloomberg

France sold 8 billion euros ($10.5 billion) in debt today as risks linked to the French presidential election drove up yields.

The amount sold was at the maximum target set by Agence France Tresor, the country’s debt-management body. France sold 2.7 billion euros of benchmark five-year debt at an average yield of 1.83 percent, up from 1.78 percent on March 15.

Earlier today, Spain sold 2.54 billion euros in two- and 10-year bonds, slightly more than the maximum target of 2.5 billion euros. Borrowing costs rose as Spanish Prime Minister Mariano Rajoy’s struggles to meet deficit targets.

Scrutiny of both countries is increasing amid the fading effect of the European Central Bank’s longer-term refinancing operation, which injected about 1 trillion euros of liquidity into the region’s financial system. The yield on Spain’s benchmark 10-year bond has jumped about 1 percentage point since the beginning of March to above 6 percent, while the yield on the equivalent French debt has gained more than 10 basis points with Socialist Francois Hollande leading in election polls.

French voters choose between 10 presidential candidates three days from now and face a choice between the two leading contenders in a second round scheduled for May 6. Socialist candidate Hollande has consistently led President Nicolas Sarkozy in polls for the decisive final ballot.

While Hollande has pledged to meet the deficit reduction targets put in place by the current government, his plan forecasts a balanced budget in 2017, a year after Sarkozy. He has suggested raising the minimum wage and promised to tax personal earnings of more than 1 million euros at a rate of 75 percent. The proposals have raised concern that he may not be committed to improving France’s competitiveness.

France sold 3.55 billion euros of bonds maturing in September 2014, 1.73 billion euros maturing in April 2015 and 2.7 billion euros maturing in February 2017. In addition, it plans to sell as much 3 billion euros in inflation-linked securities maturing in July 2018 later today.

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net


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