As France's fiscal situation continues to worsen and they get more pressure to make spending cuts reign in the biggest government in Europe; what do people see happening with French Bond yields? I'm currently short French debt with a tight stop as I don't know when the trend will change. I'm thinking there is near term bottom around 2%. I know eventually yields will rise and the spread will widen between German bunds. Is anyone else trading French debt? Or have an opinion on France's outlook
The level of public debt is high but private debt is not so high compared to the rest of Europe. They will be in a situation where they will find it hard to finance things soon and they may have to make bigger cuts. They can't QE because they are in the Euro so they will have to make bigger cuts or borrow more. That is the only option they have so they will likely have to borrow more due to the left wing government.
Yes! The beauty of being short weak, or overbought Euro bonds, is that they have no QE options like the US, England and Japan have. The ECB has stated they will help, but that doesn't compare to unlimited funds and devaluation through QE.