The principal method of issuing French government securities since 1985 has been the "bid price system" (referred to in France "à la hollandaise"). Nowadays bank syndication is used only in special circumstances. Participants compete in the auction on an equal footing through a transparent system of open bidding according to a planned issuance program.
1. Auctions using the bid price system
The bid price system consists of serving securities at the bid price or the effective bid rate as opposed to the marginal price or rate. This type of auction is known as an "auction with several prices and sealed prices". The highest bids are first served, followed by lower bids and so on, up to Agency France Trésor's target amount. Participants pay different prices, precisely reflecting their bids. Bids for OATs and BTANs are made minus accrued interest, expressed as a percentage of the par value with two decimals. Bids for BTFs are made including interest to three decimals (ticks of 0. 5 c).
Participation conditions: Any institution affiliated to Euroclear France and holding an account with the Banque de France is eligible to bid in response to calls for tender.
For BTFs, Agency France Trésor announces one business day prior to auction the amount of the lines to be issued, in accordance with the quarterly calendar for BTFs.
For OATs and BTANs , Agency France Trésor announces four business days prior to auction the securities concerned and an upper and lower limit.
Bids by eligible institutions must be handed in to the Banque de France 10 minutes prior to the time of the auction at the latest. The Banque de France ranks bids in ascending order of rates for BTFs and in descending order of price for OATs and BTANs. The results are then reported to Agency France Trésor, withholding the names of the bidders.
The Agency determines the amount to be allocated on each line, based on the prices and volumes tendered for each line auctioned. The aggregate amount allocated falls within the upper and lower limits announced for BTANs and OATs, while in the case of BTFs it matches the upper and lower limit announced after rounding as required.
So as to keep the issued amount within the announced range, Agency France Trésor reserves the right to scale down bids at the lowest accepted price (OATs and BTANs) or rate (BTFs) on a pro rata basis.
Publication of prices
Auction results are announced to the bidders as soon as the bids have been examined and are displayed on the specialized agencies' screens. (AFP, Bloomberg, Dow Jones, Reuters). They indicate the volume requested, quantity provided, marginal price for each security (or marginal rate for BTFs), and the weighted average rate for the various securities auctioned. Less than five minutes elapse between the deadline for handing in bids and publication of results.
This length of time has been greatly shortened by the introduction of screen-based bidding and data transmission via TELSAT, which is open to all regular participants. Among the major sovereign borrowers, France nowadays has the shortest auction times. Occasional bidders may also participate in auctions via the SWIFT messaging system.
MAJ : 22 2012