French Bond Risk Hits Euro-Crisis Levels

European banks are currently experiencing their strongest financial health in three decades, characterized by resilient credit conditions and a notable pickup in loan growth despite ongoing energy price pressures. Huw van Steenis, Vice Chair at Apollo Global Management, observes that while fiscal consolidation remains difficult for European nations due to entitlement spending, corporate managers are demonstrating significant adaptability in navigating macro stresses. A major shift is occurring in European credit markets as global hyperscalers and AI developers triple their bond issuance in European currencies, accounting for 20% of Swiss investment-grade issuances this year. This surge is driving a transition where large-scale project financing increasingly moves toward private credit markets rather than traditional banks. Meanwhile, the British pound remains supported by a yield premium, with UK 10-year gilts at 5.4%, as markets price in a fiscal risk premium following recent economic volatility.