French Banks: Et Rebelote!

This report spotlights French banks' credit performance. Over the ~5 weeks since early September, French banks underperformed in senior: French Bail-In Senior widened ~14bps versus the broader Bail-In senior index at ~7bps, and French Senior Preferred widened ~24bps versus the Senior Preferred index at ~18bps. The key feature is top-of-stack compression, not decompression: the Senior Preferred vs Bail-In Senior basis narrowed from ~22bps to ~14bps even as the rest of the capital structure re-expanded (AT1/T2 ratios rose from ~2.1x to ~2.3x). The report judges that transmission of sovereign spread repricing into fundamentals looks muted, as most large French banks' OAT holdings are held at amortised cost and, with hedging, every ~100bps of OAT widening implies no more than single-digit bp impacts to CET1;