France pays higher yields in €7bn bond auction

France has been forced to pay markedly higher rates to persuade investors to buy its debt in a bond auction today.

Paris sold €7bn of medium-term debt at average yields of up to 2.44 per cent, higher than the last auction a month ago.

However, AAA-rated France’s yields remained far below Spain, which has set alarm bells ringing by selling ten-year bonds at a critical level of 6.975 per cent, the highest borrowing costs since 1997.

"The Eurozone has got to deliver something which is going to calm markets down and at the moment markets feel like they are being given no comfort whatsoever," said Marc Ostwald, strategist at Monument Securities.

France’s debt management agency Agence France Tresor said it had placed €950m, and €1.07bn, respectively, of its two per cent BTANs maturing September 2013 and July 2015.

The BTAN maturing September 2013 had an average yield of 1.85 per cent – compared to 1.31 per cent at the last auction a month ago. The note maturing July 2015 had an average yield of 2.44 per cent versus 1.96 per cent.

Fears that the Eurozone’s second largest economy is getting sucked into the maelstrom have taken the two-year debt crisis to a new level this week.

France is battling to hold on to its prized triple-A credit rating, which allows it to service its debt more cheaply, with many investors having already priced in a cut.