Senior Euro Zone official does not see contagion from the rise in French bond yields so far; French yields are responding to news out of Paris; France is as an economy that is fundamentally solid and has all the capacity to tackle its challenges

Officials publicly discounting contagion risk is a standard feature of spread-widening episodes in the euro area, and the pattern has historically been that such assurances arrive when a domestic shock is pushing one sovereign's spread against the core wider while peers remain orderly. The operative transmission channel here is the France-Germany spread rather than the level of French yields themselves: idiosyncratic political news out of Paris tends to show up first in OATs versus Bunds, and true contagion is defined by whether Italian, Spanish and other periphery spreads start moving in sympathy, which is precisely what the official is saying has not occurred. The qualifier 'so far' is the tell; commentary of this kind leaves the door open and tends to be repeated, then escalated, only if the widening persists. The fundamentally-solid-economy framing is boilerplate from this kind of official and carries little information on its own. What is worth watching is the periphery spread complex as the contagion gauge, any ECB commentary on fragmentation tools, and the domestic news flow out of Paris that is driving the move, since French spread episodes driven by fiscal or political developments have tended to track headline risk rather than macro data.