France Represents The Worst Of The European Trainwreck And Its Borrowing Costs Are Plummeting

France is the poster child for sick Europe.

Its economic stats are dismal. Its leaders are very unpopular. It makes law that gets mocked by the economist and Gerard Depardieu.

It’s all horrible.

But one thing that’s not bad is the cost of government borrowing.

Yield in French 10 year Oats (bonds) is plummeting, down to 1.72%, virtually the sam level as the US borrows at.

Here’s a 6-month yield chart, via Bloomberg. You can see how fast and hard things have fallen.

Screen Shot 2013 04 08 at 4.21.09 AM

So why, if things are going so badly, are yields collapsing?

Well remember, falling yields are the norm around the world when weakness sets in. It’s only in peripheral Europe where we’ve been observing this strange phenomenon of surging yields during bad times, and that’s because they’re seen as weak credits that could theoretically run out of money.

People don’t see that in France, because it’s assumed that the ECB would step in in a big way long before a true sovereign debt crisis erupted in France. So rather than worrying about France as a credit, people just see it as a big core bond market to rush to in a storm (and Europe is in a storm again).

(Via @pegobry)

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