(Bloomberg) -- France received good demand for its first bond auction since the election earlier this month, a result that will help turn the page on a turbulent period for the nation’s markets.
The Paris-based Treasury raised €11.5 billion ($12.6 billion), the upper end of its target, with the sale of four notes with maturities that span out to 2032. Combined orders were more than €28 billion. It also issued €2.5 billion of inflation-linked bonds.
The bid-to-cover ratio for the three-year note that pays a 1% coupon was 2.47, above the 2.05 seen in late June for a similar-maturity debt issuance. Demand for the other bonds was also slightly stronger than in previous sales.
President Emmanuel Macron’s decision to call a vote last month raised the specter of unbridled public spending under a far-left or far-right government. That drove the spread between French and Germany 10-year bond yields to the widest level in more than a decade.
But volatility in French assets subsided and borrowing costs eased after no party emerged with a clear majority. A caretaker government is now running the country until negotiations to find a new prime minister bear fruit.
France opted to downsize an auction last month due to the heightened uncertainty heading into the first round of voting, though the sale met with solid demand. A subsequent auction also saw decent orders, with the Treasury raising €10.5 billion through maturities of up to 40 years, the maximum amount targeted.
While investors remain cognizant of France’s fiscal challenges, they’re now paid a higher premium. The spread between French and Germany 10-year bond yields is hovering around 66 basis points, about 20 basis points below the high reached in late June, but still above their five-year average.
The auction had muted impact on markets, with French bonds holding onto earlier losses. The yield on benchmark 10-year notes rose two basis points to 3.10%, in line with peers.
(Updates with results of inflation-linked bond auction in paragraph two.)
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