So this being said, I wanted to have a patriotic moment and put on my French hat for something that has been slightly upsetting me in the past months. A lot of articles have mentioned the widening French/German spreads in bond yields, in parallel mentioning the actual Spanish and Italian yields. This means that in the same paragraph, you hear about a relative value and an absolute value. This has been used as evidence that France is next. There is no denying that the spread has increased
|10-Year French/German spread|
Now, I haven't seen in any of those articles a way to distinguish whether the widening spread was due to a flight to safety to Germany or an aversion to France risk. Via MarketBeat, here are the France v. German 10year -bond yield in the last 30 years:
|German Government Bonds 10 Year|
|French Government Bonds 10 Year|
But I still think that there's an empirical test that has not, and that should, be done so that we can know the whole story.
On a related note, Floyd Norris gives us a nice chart today showing that Germany rebounded quite well from the bottom of the crisis
here are the Real GDP growth rate quarter to quarter since 2005: