Michael Burke has noted in the Socialist Economic Bulletin:
The victory of Francois Hollande in the French Presidential contest provides a further insight into the operation of the bond markets. It is frequently argued that there can be no retreat from ‘austerity', which in reality is simply the transfer of incomes from labour and the poor to capital and the rich, because the bond markets will recoil and long-term interest rates will soar. This is important as significantly higher long-term interest rates could, unchecked, choke off recovery.
As the new French President has made some gestures in the direction away from ‘austerity', then it should be expected that at least French long-term interest rates would rise as a result. But French government bond yields have fallen since the Socialist victory, by 18bps (basis points, equivalent to one hundredth of a percentage point, or 0.18 per cent). Ten-year French government bond yields declined to 2.79 per cent, lower than before the election.
So much for the markets will run away from austerity. As Michael notes:
The repeated assertion that pro-growth policies cannot be adopted because of the negative reaction of the bond markets is a false one.
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One in the eye for The Economist!
Actually just looking a bond yield is a little misleading in the Euro area, what is more important is looking at the spread over German bunds being the true risk free instrument in Euros. Frence spreads have gone up around 20bps, so there has been a worsening in the bond markets view of France, but certainly not a very siginficant one.
Maybe once the news came out that he owned a holiday home (with swimming pool!) as well as two buy to let apartments in Cannes, his threats to attack the rich were seen as a bit empty!
Depends what you mean by collapse. The Hollande victory was largely discounted by the market, so it would be wrong to expect a big jump on the result that was largely expected. There would be a much larger change on the back of any specific measure enacted by Hollande.
You really do believe in confidence fairies don’t you?