French banks could face higher funding costs and losses associated with their domestic debt holdings if upcoming parliamentary elections result in a prolonged period of political instability, Moody’s has warned.
Uncertainty over the outcome of the vote, which begins on June 30, pushed the yield on French sovereign bonds to 74 basis points over benchmark German bunds as of June 21, said Moody’s analysts in a research note published on Thursday. It has risen from below 50 basis points at the beginning of the month, the note stated.
