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[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ admin_label=”Blog Section” _builder_version=”4.18.0″ background_enable_color=”off” background_enable_image=”off” custom_padding=”0px|0px|0px|||” locked=”off” global_colors_info=”{}”][et_pb_row admin_label=”CTA Button” _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.27.9″ _module_preset=”default” text_font_size=”15px” text_line_height=”1.8em” global_colors_info=”{}”]<\/p>\n
Normally, one would not expect a company to borrow more cheaply than its own government. The State sets the rules, collects the taxes and issues the bonds that everything else is priced against, so its curve acts as a floor. In France, that floor has given way.<\/p>\n
Bloomberg data show that around 38% of French investment-grade corporate bonds, about \u20ac215 billion, now yield less than French government bonds (OATs) of similar maturity. In January, the figure was roughly \u20ac12 billion. Earlier this month Air Liquide raised \u20ac2 billion, drew around \u20ac12.5 billion of orders and priced both fixed-rate tranches below the OAT curve.<\/p>\n
We think the move makes sense, up to a point. It reflects a genuine loss of confidence in French public finances. But it does not make a French company a better credit than the French State, and we would be wary of treating it as the new normal.<\/p>\n
At the start of October, the 10-year spread between OATs and German Bunds closed the week at 141 bps. That is about 10 bp short of the weekly peak of January 2012, in the middle of the euro debt crisis. The jump that week alone was 32 bps, the largest weekly move in our data going back to 2008. By 9th October it had eased slightly, to 137 bps.<\/p>\n
The pattern is easy to follow. Once the 2011-12 crisis was over, the spread spent the best part of a decade between 20 and 60 bps. Then Emmanuel Macron dissolved the National Assembly in June 2024, and the spread jumped above 75 bp in a week. It has not been stably back to its old range since. Over the past few weeks, it has taken off again.<\/p>\n
The comparison with Italy may say even more. France first paid more than Italy to borrow at ten years on 15th September 2025. For a while the two kept swapping places. Since 4 August 2026, though, France has paid more every single trading day, about 30 bps more by mid-October. Spain now borrows roughly 75 bps below France.<\/p>\n
We do not read this as noise. The spread is wider on long maturities than on short ones, which is what one would expect if investors were asking for a lasting premium for fiscal and political risk, rather than reacting to a technical blip.<\/p>\n
Fundamentals explain the direction of travel. Three quirks of the French market explain why it has been so fast.<\/p>\n
The first is who owns the debt. Around half of French government bonds sit with foreign investors, far more than in Italy or Spain. That makes OATs quick to react when international sentiment turns, whatever is happening at home.<\/p>\n
The second is leverage. Hedge funds had built large positions in OATs, hedged with swaps and financed in short-term repo. When prices started to fall, stop-losses kicked in and they had to sell. Some estimates put up to half of the recent widening down to this unwinding.<\/p>\n
The third is the lack of a guaranteed safety net. The ECB does have a tool to calm disorderly spread moves, the Transmission Protection Instrument, but a country has to be in line with EU fiscal rules to use it. France is under an excessive deficit procedure, so markets are not counting on it.<\/p>\n
Mostly, it comes down to where the money is made. L’Or\u00e9al, TotalEnergies and Air Liquide earn most of their revenues abroad, so global demand matters far more to them than the French budget. The State has no such cushion: all of its risk is French. Investors are simply pricing that in.<\/p>\n
Supply and demand do the rest. The Treasury is issuing record amounts of OATs, while good-quality corporate paper is scarce. Credit funds and insurers that have to stay invested in euro corporate bonds end up chasing the same handful of names, which pushes their yields lower still.<\/p>\n
The geographic argument holds, but only so far.<\/p>\n
For a start, the State can always tax its companies. When public finances are squeezed, large firms are usually among the first asked to chip in, through one-off surcharges on corporate tax or sector levies. A company is \u201csafer than the State\u201d only until the State sends the bill.<\/p>\n
The two kinds of bond are also not directly comparable. OATs are among the most liquid bonds in the world, and banks can use them in repo and count them as top-tier liquid assets. A corporate bond offers none of that, so part of its lower yield reflects scarcity rather than lower risk.<\/p>\n
Finally, history is not on the side of a lasting split. In 2011-12, several Spanish and Italian companies also traded below their governments. Once the ECB stepped in and the sovereigns stabilized, the gap closed. In a real French debt crisis, contagion and tight liquidity would hit French companies too.<\/p>\n
Some industrial and consumer groups may have broken away from the sovereign. French banks have not. They hold a lot of French government debt, and their funding costs move with the State’s. Insuring French bank bonds against default now costs more than for comparable European lenders.<\/p>\n
For anyone managing a company’s cash, this is where the issue stops being abstract. Deposits, bank commercial paper and money market funds heavy on French paper all carry some French sovereign risk. Often, nobody has ever looked at them that way.<\/p>\n
Two dates stand out in the coming weeks: Moody’s review of France on 23 October and the ECB meeting on 29 October. The debate on the 2027 budget will be running in parallel.<\/p>\n
French companies borrowing below their government show how far confidence in French public finances has slipped, even though their fortunes remain tied to the State that taxes them. For investors, the useful exercise now is to measure how much French risk their cash already carries, and to decide whether that exposure is intended.<\/p>\n
Market data and press sources used for context: Bloomberg, New Momentum analysis. Spread figures are weekly closes; yields are daily closes. Data as of 16th October 2026.<\/p>\n
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Safer than the State? French corporates trading below OATsNormally, one would not expect a company to borrow more cheaply than its own government. The State sets the rules, collects the taxes and issues the bonds that everything else is priced against, so its curve acts as a floor. In France, that floor has given way. […]<\/p>\n","protected":false},"author":8,"featured_media":8209,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"footnotes":""},"categories":[74],"tags":[],"class_list":["post-8218","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n