A new contract to cover risk on bonds issued by heavily-indebted France is getting a rough ride in Paris, just a week before the first round of a hotly-contested presidential election.
The launch of futures trading on 10-year French bonds or "obligations assimilables au Tresor" (OAT) has fuelled allegations that speculators will target France, even though the securities might actually help the next president reduce the national debt.
Eurex, a Frankfurt-based derivatives unit of stock market operator Deutsche Boerse, will begin trading Euro-OAT Futures on Monday, adding the instrument to a market which already exists for German and Italian debt.
Leaders of French left and extreme-right parties have attacked the launch, and the head of the French stock market watchdog, Jean-Pierre Jouyet, told AFP the move did not send "a good signal", given that many in France blame the financial sector for much of the stress in the economy.
Socialist front-running presidential candidate Francois Hollande has tapped into a long-standing strand of hostility towards markets, vowing to "dominate" the financial bogeyman as soon as the election is won.
Jouyet acknowledged that the OAT futures, which allow investors to buy or sell French bonds at a pre-determined date -- often three months hence -- and price, "can be considered speculative."
But he also pointed out that OAT futures would be more transparent and better controlled than credit default swaps (CDS), a kind of insurance policy against sovereign defaults which are traded now in more opaque conditions.
French central bank governor Christian Noyer noted Friday that the new instrument, by helping investors hedge against risk on French bonds, will boost the market, and that increased trading "could improve, in the sense of reducing, the issuer's financing costs."
That would be good news for the next French president, since national debt at the end of last year stood at 1.7 trillion euros ($2.2 trillion), or 85.8 percent of the country's output, far above the EU limit of 60 percent.
Noyer dismissed arguments that OAT futures will fuel attacks against France, and pointed out that the first European future contract for public debt was launched about 20 years ago under Socialist president Francois Mitterand.
That instrument was abandoned after the eurozone was created and futures trading based on the 10-year German bond, or Bund, became the norm.
The Bund contract is the so-called benchmark in the eurozone because Berlin can usually borrow money at the lowest interest rates owing to confidence in its economy.
A German financial market source told AFP Friday that it was "absurd" to worry about OAT futures being used for speculation, saying that their trading volume would probably be limited to 5,000 to 10,000 contracts per day.
That compared with one million per day for Bund futures, the source said.
Eurex nonetheless pointed to strong demand for an instrument based on French debt, saying in a statement: "We are responding to the great interest shown among market participants in more customised hedging solutions."
The OAT futures will also provide a yardstick for market sentiment with respect to German and Italian debt, the two biggest eurozone issuers.
French politicians such as Jean-Luc Melenchon of the Left Front, have attacked the contracts as a way for "banksters" to make stacks of money on the backs of French workers.
Marine Le Pen of the far-right National Front called the move a "financial attack" and termed the futures a weapon of "guilded fascism" being wielded by powerful banks.
Investors reply to such criticism by stressing that derivative instruments such as futures are needed by the commodity, industrial and financial sectors to manage risks and note that speculators can suffer losses as well as reap profits.