BlackRock’s view reinforces a theme running through bank research this week: higher yields are now the norm, but the reasons behind them matter more than the level. For euro area bonds, the near-term focus is Moody’s decision on France’s credit rating, with a downgrade likely to pressure French debt and widen the gap over German Bunds. Any spillover selling in markets such as Spain could prove an opportunity if fundamentals hold up, in BlackRock’s view. Its upgrade of US Treasuries signals that the world’s largest asset manager sees value in longer-dated US debt at current yields, which could help cap further rises if other investors follow. A rising term premium driven by fiscal worries remains the main risk that could push yields higher still. Elevated energy costs linked to the Iran war add to inflation risks that feed into that premium.---Higher yields are everywhere, but BlackRock’s message is that not all of them are worth having, and France shows the difference between being paid more and being paid enough.Summary:BlackRock says the sharp sell-off in French government bonds shows why investors need to understand what is driving yields higher.France’s 10-year yield has risen about 100 basis points since early August to nearly 5%, with a widening spread over German Bunds reflecting fiscal and political risk.BlackRock sees today’s backdrop as materially different from the 2011-12 euro debt crisis, with stronger banks, more powerful ECB tools and euro area debt back at around 89% of GDP.The firm upgraded US Treasuries last week, trimmed its underweight on Japanese government bonds and favours emerging market local-currency debt, especially in Latin America.In corporate credit, it prefers higher-rated high-yield bonds and avoids both investment grade, under pressure from heavy AI-related issuance, and the weakest borrowers.Markets are watching Moody’s decision on France’s credit rating and UK CPI data this week.France’s government bond sell-off is a reminder that higher yields are not all equal, according to BlackRock, which says investors need to be increasingly selective as competition for capital intensifies.BlackRock is the world’s largest asset manager and the owner of iShares, the biggest provider of exchange-traded funds. Its views are closely watched because changes in its asset allocation can influence flows across global markets, and its weekly research from the BlackRock Investment Institute is widely followed as a guide to how big institutional money is positioning.In its latest commentary, BlackRock said rising government borrowing and AI-related investment are pushing up financing costs globally, exposing borrowers with weakening fundamentals to closer scrutiny. France’s 10-year yield has climbed about 100 basis points since early August to nearly 5%. Part of that reflects the broader global reset in interest rates, but BlackRock said the widening gap between French and German yields shows investors are also demanding extra compensation for France’s fiscal and political risks.The firm sees risks of spillover from France but does not expect a repeat of the 2011-12 euro debt crisis. France’s government debt has risen from roughly 89% of GDP in 2011 to around 119% today, but the euro area’s overall debt ratio is back at about its 2011 level of around 89%. The region also has stronger banks and more powerful European Central Bank tools, though BlackRock noted intervention is not guaranteed. Indiscriminate selling could create opportunities in markets such as Spain, it said, but it remains neutral on euro area government bonds for now.Higher yields are also creating opportunities. BlackRock said more than 80% of global bonds now yield above 4%, compared with about 6% five years ago. It upgraded US Treasuries last week, saying higher starting yields provide a bigger cushion against further rate increases and that markets may have priced in too much Federal Reserve tightening. It also trimmed its underweight on Japanese government bonds after long-term yields climbed above 3%, and favours emerging market local-currency debt, particularly in Latin America.In corporate bonds, BlackRock favours higher-rated high-yield debt for income while avoiding both ends of the credit spectrum. Heavy AI-related issuance is weighing on investment-grade bonds, it said, while the weakest borrowers face tougher refinancing conditions.The firm also pointed to last week’s tech sell-off, when concerns over the pace of AI spending pushed the Nasdaq down nearly 5%. It still favours AI within a neutral stance on US equities.Attention now turns to Moody’s decision on France’s credit rating (due froday October 23) and to UK inflation data, which BlackRock will watch for a read on global price pressures. It sees a rise in the term premium, particularly if driven by fiscal concerns, as the key risk that could push yields higher. This article was written by Eamonn Sheridan at investinglive.com.