Franklin Templeton’s fixed-income team, led by global CIO Sonal Desai, warned
sustained selling of French government bonds could escalate into a eurozone debt
crisis potentially more severe than the crisis of the early 2010s and said
markets are unprepared. On Tuesday the 10-year French yield premium to German
Bunds topped 150bps for the first time since January 2012. Desai said France —
the eurozone’s second-largest economy (GDP ~€3.0t) with roughly €3.6t of debt —
would present a far larger stress test for the EU than past sovereign cases; its
debt stock is more than ten times Greece’s, making simple bailout options
infeasible.
