AGENCE FRANCE TRESOR is tasked with managing the government debt and cash positions under the most secure conditions in the interest of the taxpayer.
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FAQ (1)  

Active management of your OAT
To gain a better understanding of bonds and market mechanisms

1. What is a bond? 
2. What is an OAT?
3. A secondary market tailored to retail investors
4. Where can I buy and sell OATs?
5. What does accrued interest mean?
6. How do you read OAT listings?

1. What is a bond? 

A bond is a transferable security that is a debt instrument. In legal terms, the bond bearer is a creditor of the bond issuer. He has lent the issuer money.

The issuer grants the following undertakings to the bearer or holder of a bond:
• he will repay the loan to him, at its maturity date,
• he will pay him interest on the sum of money borrowed: this interest is also known as the coupon*.

A bond is characterised by:
its face value* or principal*: the unit value of the bonds comprising a borrowing, which is used as the basis for calculating interest. It is also used as the basis for fixing the redemption value at maturity.

its coupon* or nominal interest rate*, i.e. the remuneration owed by the bond issuer to the bearer. This interest rate may be fixed or variable depending on the type of bond. The date from which interest is calculated is the date of first entitlement to interest payments* on the bond.

its maturity* or repayment date. When it reaches maturity, the issuer will have paid the full repayment price of the bond, i.e. its principal plus any redemption premium.

its repayment methods: the conditions under which the bond is repaid, e.g. as a lump sum or by means of periodic repayments (redemptions).


2. What is an OAT? 

OATs (French Government Bonds) are transferable securities.
They constitute the financing method used by the State for long-term borrowing. Every year, the State has to be granted authorisation to borrow by the finance law.

An OAT is always a bond whose principal is repaid at the end, i.e. in the form of a single payment at the maturity date. OATs are instruments that are subject to assimilation*, and are issued for a term of up to 50 years.

In 2005, the State modernised the secondary market* for OATs aimed at retail investors, to enable them to carry out all purchase and sale transactions, on each Stock Exchange trading day, on a wide range of OATs listed on Euronext:

Primary Dealer banks (SVT) undertake to continuously display a price spread and to act as market-makers for any orders placed. They make the market and contribute liquidity. This organisation system offers investors who purchase OATs the liquidity they are entitled to expect and regular information on prices.


3. A secondary market tailored to retail investors

Like any transferable instrument or security, OATs can be traded on the Stock Exchange at the market price at any moment.
In particular, retail investors can intervene on the market managed by Euronext, which operates in accordance with the stock-market regulations in force and obeys their rules governing transparency and information.

The way in which transactions on OAT are organised here had modernised in 2005 under the auspices of the State, to ensure that this market is properly tailored to the needs of retail investors:

> Liquidity of the market
OATs enjoy a high level of liquidity. Indeed, financial establishments that are market-makers* have undertaken to oversee transactions. Retail investors can thus always find a price at which they can purchase or sell OATs.
> Placing orders
Orders can be placed in the traditional way with financial intermediaries. They can also be placed via on-line broker HYPERLINKS. A list of financial intermediaries operating as partners of Agency France Trésor to ensure the smooth functioning of the OAT market appears on the website, and on page 15 of this guide. 
> Safe custody charges
Safe custody charges, and any transaction costs on disposals taking place prior to the redemption date of OATs, are those specified in the financial intermediary's general terms and conditions covering transferable securities. No handling charges are applied to OATs.

If the same client owns several comparable* lines corresponding to the same counterfoil, the financial intermediary will only invoice safe custody charges for a single line, unless otherwise specified by the service-provider.


4. Where can I buy and sell OATs? 

> From our partner networks (list to be updated)

> Who are the players in the market? 

See our Primary Dealers on the website

> For further information:
• the AFT website: a dedicated area for retail investors:
• the Euronext website:
• newspapers: several daily or weekly titles carry a list of the main OAT lines.


5. What does accrued interest mean? 

Accrued interest is the coupon value attached prorata temporis to a bond or OAT on a given day. Indeed, an investor who purchases but then resells an OAT before the latter has paid its annual coupon does not receive any interest from the issuer. Nevertheless, he must be remunerated for owning a bond instrument for part of the year.

This remuneration is guaranteed by virtue of accrued interest. Accrued interest represents the interest owed on the period that has elapsed since the date of the latest coupon paid or, if no coupon has yet been paid, since the date of first entitlement to interest payments*.

An investor who sells an OAT receives accrued interest from the purchaser at the settlement date; this settlement date is three days after the transaction date; the seller thus receives, from the purchaser, the amount of interest accrued since the latest coupon paid (or the date of first entitlement to interest payments) calculated at the settlement date: he is therefore not penalised for selling an OAT before the next payment or “detachment” of his coupon.

Taking a concrete example

The OAT 2.25% 25 May 2024, with a settlement date of 11 February 2014
• the number of days that have elapsed since the last coupon
(i.e. 25 May 2013) is 262 days; 
• the exact number of days between the previous coupon and the next one is 365 days;
• the accrued interest thus amounts to: 2.25% x (262/365) = 1.615%


6. How do you read OAT listings? 

> Listing principle
OATs are bonds. Their listing method works like bonds and not like stocks and shares listings. 
OATs are thus listed as a percentage of the face value, excluding accrued interest.

Example of listing

On 15 January 2014, the OAT 2.25% 25 May 2024 is offered at 96.99% (excluding accrued interest of 1.492%). This means that an investor who wishes to purchase 1,000 bonds will have to pay:
1,000 x (96.99% + 1.492%) 

Listing taken from the website

> The face value
The face value corresponds to the amount of capital that is remunerated at the coupon rate.
This is the amount that will be repaid at maturity i.e. €1 per bond.

> ISIN code
This is the identification number for transferable securities which meets international standards.

> Prices
Bonds are not listed in euros, like stocks and shares, but as a percentage excluding accrued interest. To obtain the price of a bond (OAT), you have to multiply the face value by the price expressed as a percentage, plus accrued interest expressed as a percentage.

> Accrued interest
Accrued interest represents the part of the coupon owed at time T.

> Coupon
The coupon is equal to the rate indicated in the bond's name multiplied by the face value.

> Redemption (or repayment or maturity) date 
This is the date on which the State will repay, to the OAT holder, the amount of the face value, i.e. €1 per bond; on this date the State also pays the amount of the final annual coupon.

> Settlement date
As with most transferable securities listed in Europe, settlement for the purchase or sale of an OAT is made 3 stock exchange trading days after the transaction.
It is the interest accrued at the settlement date, and not on the transaction date, which is taken into consideration for the purpose of calculating the OAT price; likewise, in the case of OATi and OAT€i, it is the indexation coefficient at the settlement date that is applied.