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AGENCE FRANCE TRESOR is tasked with managing the government debt and cash positions under the most secure conditions in the interest of the taxpayer.
Home > Debt management > Debt management in 20 questions
Debt management in 20 questions
1. Why does the government borrow? 
    The State borrows each year to finance its deficit and to repay past loans on maturity. See the "Indicative State financing programme for 2008".


2. What is the difference between public debt and State debt? 
See "Definition and scope" of Debt Management.


3. Of what does State debt consist? 
    State debt consists of: 

. negotiable debt, accounting at the end of 2007 for 77% of State debt. See "French government long- and medium-term negociable debt " and "Negotiable debt outstanding" (graphs and tables are updated every month) 

. non-negotiable debt: this type of debt is decreasing every year. It mainly consists of the deposits of Treasury correspondents less the balance of the State account at Banque de France. It includes the non-significant balance outstanding of old borrowings and rents.


4. Who holds State debt? 
See "Who holds the government debt ?" (under "Debt management" then "Main figures")


5. Doesn't the fact that debt is held by non-residents raise problems? 
On the contrary. An issuer reduces its refinancing risk by diversifying its investor base, partly because the volume of potential demand increases and partly because the average behaviour of investors tends to remain stable in the long run.


6. At which rate does the State take out loans? How much do government bonds yield? 
See "French government yield curve" (under "Debt management" then "Main figures")


7. What is the secondary market? 
The secondary market, which allows an investor to buy or sell securities through an intermediary, is distinguished from the primary market, on which investors buy newly issued securities directly from the issuer.


8. Why does AFT ask Primary dealers (SVT) to maintain liquidity on the secondary market? 
While AFT could theoretically limit its focus on the primary market, in practice it needs an efficient secondary market in government securities. In fact, the more liquid the market, the higher the price of issued securities (and therefore the lower the interest rate).


9. What is a Primary dealer? What is its role? 
See "Primary dealers missions" (under "Agence France Trésor" then "Partners")


10. Who are the Primary dealers? 
See "Primary dealers list" (under "Agence France Trésor" then "Partners")


11. What is a swap? 
A swap is a contract under which two parties agree to swap interest flows over a given period for a given amount. One party pays a fixed rate, the other a variable rate.


12. Why does AFT use swaps? 
See "Swaps" (under "Debt management" then "Active debt management")


13. How are auctions organised? 
See "Auctions technical aspects" (under "Debt management" then "Auctions")


14. When do auctions take place? 
See "Auction indicative calendars" (under " Debt management" then "Auctions")


15. How much does AFT issue per year? 

See "Indicative State financing programme for 2008" (under "Budgetary environment" then "Main figures")




16. How much has it already issued this year? 
See "Long-and medium-term financing over the year" and "OATs and BTANs issues and cumulative total" (under "Debt management" then "Main figures")


17. How do the rates of French government securities compare with those of the securities issued by other Member States in the euro zone? 
See "Spreads metric" (under "Debt management" then "Debt indicators")


18. Why is debt service important? 
Debt weighs very heavily in France's annual budget. Coupon payments (annual interest owed on borrowed sums, known as "debt service") are the second largest budget item right after national education, i.e. € 39.5 bn in 2004. See "Cost of negotiable debt service" (under "Budgetary environment" then "Main figures")


19. How can we be certain that the State's transactions on the financial markets are without risk for the taxpayer? 
To minimise the risk connected with its financial transactions, Agence France Trésor uses a risk control framework which complies with the rules of Comité de la Réglementation Financière, the financial regulator.


20. Does debt measure all State commitments? 
Negotiable debt measures commitments in the form of securities issued and transferable on the markets (OATs, BTANs and BTFs). The State has other commitments (such as the pension rights of the State's civil servants), which are recorded in the general account of the finance administration.



MAJ : 08 July 2008