UBS chief executive Sergio Ermotti said drastic measures are needed to address the French debt crisis, arguing that gradual steps are no longer enough.
He drew a parallel with the 2011 eurozone debt crisis, but said the problem is harder to manage now because of the size of the French economy.
French yields at multi-week levels
French government bond yields have risen in recent weeks, with the ten-year reference yield exceeding 4.7 percent this week.
The yield spread between the French 10-year government bond (OAT) and the German Bund has risen above 140 basis points.
ECB intervention seen as conditional
Mitch Reznick, International credit markets leader at Federated Hermes, said the market is pricing French debt less like eurozone core countries and more like peripheral countries.
He said the European Central Bank is likely not to intervene for now, but central bank communication could change if yield spreads widen further.
Investors shift toward Bunds
The rise in French bond yields has taken place as part of a broader European bond-market selloff, with investors moving toward German government bonds perceived as safer.
Investors are increasingly worried about France’s budget situation, including high public debt, a significant budget deficit, and increased bond issuance, with political uncertainty ahead of the presidential election adding to the difficulty.
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Source: UBS
