Trying to lower the temperature, France's finance minister said the bond market is behaving as it should. On Thursday at the London School of Economics, during a fireside chat, Roland Lescure said, "We're not in a dysfunctioning market," and added that France does not need a "hand of god" to step in.
He cast the shift as part of something bigger than France: "This is a global repricing of debt expectations, inflation expectations, monetary policy expectations that's taking place, and we have to take it on board as policymakers to do the right thing." He also noted that central banks need to convince markets they will carry out their duties.
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Investors are asking for a bigger premium to hold French 10-year bonds compared with German securities that are viewed as safer. That differential has expanded to levels unseen since the euro-area debt crisis, reflecting unease over France's public finances and political backdrop, against a global selloff that has lifted yields broadly.
Lescure's message boils down to this: the bond market is repricing a lot at once, and officials say they will adapt and communicate. For anyone with European bond exposure, the key plot points are the France-Germany spread and what central bankers signal next. Those cues will shape how this repricing story reads from here.
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