France borrows $7.4 bn at negative rates

PARIS (AFP) – The French government borrowed for the first time at negative rates on Monday, meaning that investors were willing in effect to pay to hold French debt as in Germany.

The French government raised almost 6.0 billion euros ($7.4 billion) in short-term debt at minus 0.05 percent and minus 0.06 percent as rates for Spain spiked to the danger level of 7.0 percent.

Denmark, France, Germany and the Netherlands have all attracted investors willing to pay to hold their debt.

Earlier on Monday, French President Francois Hollande had stressed his intention to reduce the level of French debt.

“This is not a choice for an assault of austerity but the choice for the future sovereignty of our country,” Hollande said as he opened a two-day conference of unions and employers’ groups.

Hollande said the country faced “three great challenges”: controlling public finances, increasing competitiveness and tackling rising unemployment.

In Germany, the central bank organised an auction of six-month debt on Monday that placed 3.3 billion euros’ worth of bonds at a record low rate of minus 0.03 percent.

Investors had sought up to 5.5 billion euros worth of German debt.

Meanwhile, the bond market yield on 10-year Spanish paper spiked to 7.016 percent in afternoon trading, putting Madrid at a level where Greece, Ireland and Portugal had to seek international rescue packages.

The Italian 10-year rate rose to 6.093 percent, remaining at a level of more than 6.0 percent which is considered unsustainable over the long term.