First, the good news.French yields aren’t blowing up today or anything. In fact, the yield on the 10-year is down a few ticks today.
That being said, there’s a report (via Reuters) that S&P could lower its outlook on the French rating within a matter of days. This means France gets to keep its AAA for now, but would also suggest a decent probability of losing it in the not-that-distant future.
And why that’s a big deal is that if France loses its AAA rating, it gets harder to envision how, say, the EFSF could issue bonds with a AAA rating, and then the whole scaffolding of the bailout starts to come down.
So, nothing yet, and the market reaction is muted, but this is just another thing to be attuned to.