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French yields stayed at ultra-low levels as France auctioned debt Monday. The nation saw its debt yields remain negative on all three auctioned maturities: three, six and twelve months.

An apparent flight to safety was seen at the auction. The yield on the 3-month bills remained at a record low -0.01 percent, a level also seen at the previous auction. Moreover, yields for French 6-month bills fell to -0.01 percent from -0.04 percent at the previous auction. Lastly, the 12-month bill auction saw yields rise slightly to -0.06 percent from -0.08 percent at the previous auction.

Negative yields on safe European bonds and bills show the continued flight to safety for investors in Europe. Investors there, fearing the worst outcomes of the European Debt Crisis, have apparently shifted focus to capital preservation from growth. Thus, these investors are willing to buy sovereign debt with negative yields. The negative yields are not inflation adjusted; French inflation-adjusted bonds yield much lower.

French yields have fallen over the last few months as Spain and Italy have been thrust to the forefront of the European Debt Crisis. Investors have been selling peripheral bonds and buying core bonds, causing the spread between Spanish and German 10-year bonds to widen to record levels last week. So long as the crisis continues, yields on core bonds could stay lower.

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