French debt sale solid but euro stress remains

France drew solid demand at its first debt auction of 2012 with yields rising only slightly despite fears for its AAA rating, but that was not enough to prevent most European debt markets weakening as investors fretted about the euro zone's periphery.
Debt sales next week by more fragile euro zone economies Italy and Spain may provide a stronger test of investor appetite for the battered region.
Investors had eyed the sale of 10- and 30-year OAT bonds for signs that France's slowing economy, looming presidential election and weakening grip on its AAA rating was undermining appetite for its debt, threatening to drag the euro zone's second-largest economy into the vortex of the bloc's crisis.
The auction was nearly twice oversubscribed, however, with France selling 7.96 bln euros ($10.3 bln) of bonds, at the top of its projected range, with the yields on benchmark 10- and 30-year bonds rising only slightly.
The yield on the benchmark Oct. 2021 bond inched up to 3.29%, above the 3.18% when it was last auctioned on December 1, but in line with yields in the secondary market of just over 3.3%.