France Faces Credit Ratings Test as Debt Pile Continues to Mount

-- A trio of upcoming rating assessments is set to test France’s bond markets by turning the spotlight on the country’s worsening debt picture.A blow could arrive as soon as Friday, when Moody’s Ratings and Fitch Ratings review the nation’s credit score. The market sees a high chance the agencies will lower the outlook to negative. An actual downgrade could come next month, with S&P Global Ratings set to resolve a warning it has had in place for 18 months.

More notable is the debt’s underperformance versus Spanish, Italian and Portuguese securities, which have lower credit scores. The extra cost paid by Spain to borrow compared to France has almost halved over the past six months. Rating firms have been flagging risks to France’s credit assessment for months. Fitch downgraded the nation a year ago and in October it issued another cautious note, saying a large and persistent increase in indebtedness could trigger further negative action. JPMorgan Chase & Co. and Commerzbank AG see a possibility the firm will lower the outlook to negative this week.

France’s debt-to-GDP ratio rose from around 98% before the Covid pandemic to 110.6% last year and is expected to continue expanding to peak at 113.1% in 2025, according to government projections. Investors are ramping up their exits from Cathie Wood's ARK after an epic 72% decline in her flagship fund

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