French Yields Stay Low at Auction

French yield stayed at ultra-low levels as France auctioned debt Monday. Selling bills of three different maturities up to one year, France saw yields on its debt stay negative on all three maturities.

France auctioned new bills of 3-, 6-, and 12-month maturities, and an apparent flight to safety was seen at the auction. The yield on the 3-month bills stayed at a record low -0.01 percent from the last auction. Also, France auctioned 6-month bills, with yields falling to -0.01 percent from -0.04 percent at the previous auction. Lastly, the 12-month bill auction saw yields rise slightly to -0.06 percent from -0.08 percent at the previous auction.

Negative yields on safe European bonds and bills show the continued flight to safety from investors in Europe. Investors there, fearing the worst outcomes of the European Debt Crisis, have apparently given up searching for return on capital in exchange for return of capital. Thus, they are willing to buy sovereign debt with negative yields. Also, the negative yields are not even inflation adjusted and adjusted for inflation yield much lower.

French yields have fallen over the last few months as Spain and Italy have been thrust to the forefront of the European Debt Crisis. Investors have been selling peripheral bonds and buying core ones, seeing the spread between Spanish and German 10-year bonds widen to record levels at one point. So long as the crisis rages, yields on core bonds could stay lower.