Bond selloff reshapes Europe’s pecking order as investors dump France and rotate into Germany

A sharp selloff in European sovereign bonds is forcing investors to differentiate fiscal risk, with French and Italian spreads widening versus Germany amid deficit concerns and heavy future issuance plans. The flight-to-quality bid into Bunds and other low-debt sovereigns tightens financial conditions for higher-risk issuers and raises contagion risk across the euro zone. The episode also reinforces downside pressure on the euro through risk premia and relative yield dynamics.