France issued its first-ever ten-year bond at a negative borrowing fee on Thursday, which means investors pay, reasonably than receive, curiosity for the privilege of owning French sovereign debt, stated the state debt management agency, AFT.
AFT stated in a statement that it issued 9.996 billion euros ($11.3 billion) in lengthy-time period bonds, with just under half — or 4.972 billion euros – within the form of ten-year bonds at a rate of -0.13 %.
It’s the first time that France, the eurozone’s second-greatest financial system, has issued sovereign debt at a negative rate with a variety of different nations within the forex space — notably Austria, Germany and the Netherlands — already charging traders to purchase their bonds.
Official rates within the 19-country eurozone as a whole have been negative since 2014 when the European Central Bank lowered its crucial deposit price to -0.10 p.c.
The ECB has since cut the deposit charge additional to -0.40 %.
However, with additional easing looking likely after European Central Bank chief Mario Draghi hinted as much last month, the so-called yields, or investors’ return, on Europe’s safest bonds are falling.
On the secondary markets, the place already issued debt adjustments arms, the yield on 10-year French government bonds already drifted into negative territory in mid-June.
Outside the eurozone, EU members Sweden and Denmark even have negative interest rates, as does non-member Switzerland.
Financially weaker eurozone members Greece and Italy nonetheless have to pay higher than 2 % of curiosity to find buyers for their government bonds.
Analysts predict yields in Europe will keep falling as Draghi’s successor on the helm of the ECB, IMF chief Christine Lagarde, is predicted to increase economic stimulus either through charge cuts or quantitative easing.
However, the transfer to more deeply negative yields raises concerns that Europe could also be following within the footsteps of Japan, which has been having trouble to revive inflation and development.