Published 12 Dec 2023
France matters. It matters because its economic path has been divergent to Germany's, steadily growing to a level of indebtedness that exceeds Italy's and because it is arguably the glue that holds Europe together.
The current widespread economic decline can be seen by looking at the deterioration in French lagging, coincident and leading indicators and questions remain about the effectiveness of the government to stand together to produce an economic package that will stem a likely increased deficit and right the economy.
This research demonstrates the level of indebtedness and recent worsening of credit metrics and questions the valuation of the Oat curve with respect to those of the Bund and Btps. It also highlights how a change in curve correlations is a potential red flag about the value ascribed to French goivernment bonds compared to others.
Whilst the deterioration of German economic growth will bring the old structural issues to the fore again, this analysis discusses Oat risk reward in full