From Paul Krugman: a picture is worth a thousand words:
While Fillon obsesses about le triple-A, the better to excoriate Hollande, the market has decided not to wait for the ratings agencies and has repriced French debt as if the downgrade had already occurred, just as Hollande claims.
And just for good measure, read this:
And if you are an investor, this is the moment of truth. Everything – every asset class – depends on how the euro zone performs in the Italian Job. There are only two outcomes, here. If Italy blows up, a Depression is upon us; banks would be insolvent, CDS triggers would implode the system, bank runs would begin, stock markets would crash, and you will would see sovereign debt yields go to unbelievable lows for nations with a lender of last resort. If Italy survives, I would expect a monster rally in periphery debt, stock markets, and bank shares and a selloff in CDS at the minimum. However, the euro zone is already in recession so that rally will not be sustained.