“As challenging as France’s fiscal and political outlooks are, the country’s underlying areas of resilience include a favourable government debt profile, a resilient economy and well capitalised banks.”, — write: www.fxempire.com
Diversified Investors, Debt Profile and Safe-haven Status Drive High Liquidity This reflects a diversified and balanced investor base, with about 55% of French debt held by non-residents, an average maturity on marketable debt exceeding eight years, and a debt stock fully denominated in euros. Benchmark-sized issuance, diversified debt instruments across the yield curve including green and inflation-linked bonds, transparently managed and regular auctions, and an extensive network of primary dealers also support investor demand and strong liquidity.
Scope Ratings expects France’s 2025 funding programme (estimated slightly lower at EUR 307bn compared with EUR 319bn in 2024) to continue to meet strong investor demand. This is also supported by limited issuance volume expected from Germany, particularly after the collapse of its coalition government, with snap elections due in February.
Investor appetite for French debt may also benefit from the uncertain global geopolitical outlook, not least with Donald Trump returning to the US presidency, given France’s safe-haven status as a core euro area member state. Finally, France’s market access is complemented by its large, diversified and wealthy economy, alongside a sound and mature financial system.
Funding conditions are likely to remain sensitive to near-term fiscal and political developments, but Scope’s baseline scenario is that France’s core economic strengths offset the challenging fiscal and political outlooks at the AA- sovereign-rating level ahead of the next presidential election in 2027.
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Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH, and primary analyst on France’s sovereign credit rating. Brian Marly, a senior analyst at Scope, contributed to drafting this comment.