PARIS, April 5 France was given the benefit of
the doubt when investors demanded only marginally higher yields
on French 5- to 15-year bonds at an auction on Thursday, a day
after Spain's borrowing costs jumped at an auction amid renewed
concerns about Europe's debt crisis.
France sold 8.4 billion euros of paper maturing in the mid-
to long-term, known as OATs, near the top of its projected range
of 7-8.5 billion euros, the Agence France Tresor debt management
In a sign of firm demand, the sale attracted total bids
worth nearly three times the amount on offer at the auction, the
last for OATs ahead of the April 22 first round of France's
The next OAT auction is not until May 3, just days ahead of
the May 6 runoff which opinion polls have Socialist candidate
Francois Hollande winning.
Even though Standard and Poor's stripped France of its
prized AAA credit rating in January, French yields have fallen
since the start of the year as the European Central Bank flooded
the banking system with a trillion euros in liquidity, which has
so far helped stabilise financial markets.
However, concerns about Europe's debt market re-remerged on
Wednesday as doubts over Spain's ability to meet budget targets
hit investor demand at a bond auction in Madrid.
"Because yesterday Spain blew it, France had to deliver in a
big way today," said Achilleas Georgolopoulos, strategist at
Lloyds Bank in London.
"Based on the results, everyone in the French treasury
should be satisfied that today's auctions were very good," he
The premium investors demand to hold French bonds over
lower-risk German bonds rose ahead of the auction to the highest
level since mid February but eased by four basis points
Georgolopoulos said that a strong French auction was needed
to ensure that investors do not put France and the Netherlands
in the same boat as fiscally weaker Spain and Italy.
The yield on France's five-year 4.25 percent OAT due in
October 2017 rose fractionally in the auction to 1.96 percent -
with a bid-to-cover rate of 3.27 percent - from a yield of 1.91
percent when last auctioned March 1.
Yet for the 4.50 percent 30-year-bond, the yield fell to
3.79 percent from 3.97 percent.
Yields also rose very slightly for the 10- and 15-year 3.00
percent and 3.50 percent OATs, to 2.98 percent from 2.91
percent, and 3.46 percent and 3.30 percent, respectively.