The potential for France's fiscal risk to spill over into Europe is discussed from the perspectives of movements in French 10-year government bond yields, the fiscal balance outlook and the factors driving long-term interest rates.
A Nikkei CNBC program presented market views on the potential for France's fiscal risk to become a shock originating in Europe. The guest was Aoki Hiroki (青木 大樹) of UBS SuMi TRUST Wealth Management, and the discussion focused on France's fiscal position and developments in the government bond market.
Since September, the change in the French 10-year government bond yield has been the largest among major countries, and France's fiscal balance is projected to be significantly negative through 2030, second only to that of the United States.
The view was presented that long-term interest rates are more likely to rise in countries with high debt-to-GDP ratios and high foreign ownership ratios for government bonds. US interest rates are also continuing to rise, with inflation concerns and bond supply and demand cited as the main drivers.
Some observers believe that the spillover of French fiscal risk to major EU countries will be limited, and that the ECB could also ease its policy stance. In currency markets, the view was presented that the dollar, pound and Australian dollar would have a relative advantage over the euro.