When Francois Hollande was elected President of France, everyone was worried about his various plans to roll back reforms, lower the retirement age, and increase minimum wage.
France has always been a borderline core/peripheral credit, and so Sarkozy’s pro-austerity stance was seen as being crucial to keeping France from having a crisis of its own.
But alas! French borrowing costs have collapsed… incredibly so.
The chart below is the French 2-year yield. When Hollande took office on May 15 (where the vertical line is placed), France was borrowing for two years at over 0.7%. Today? 0.109%. The market considers, for now, France to be core, and money is rushing into its debt.
DISCLOSURE: The author stands to win $250 in a bet on that French 2-year bonds will see negative yields by the end of the year.
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