Interest-rate swaps
AFT has managed the average residual maturity of debt since 2001. This maturity has been fairly long as a natural result of the requirement that each issue be liquid, of growing demand from investors for very long maturities and of refinancing risk management. When the yield curve is clearly normal, with higher yields on the longer maturities and lower but more volatile yields on the shorter ones, reducing average maturity should help reduce the cost of servicing the debt in the long run, all else being equal. On the other hand, this cost will be more variable.
The aim of reducing the average residual maturity of debt is to strike a balance between lower interest expense and greater variability of this expense. Such a reduction should be implemented gradually over at least one economic cycle, since interest rates vary according to economic conditions. In October 2021, the last transactions under AFT’s interest-rate swaps programme reached maturity. The cumulative gains from the swaps programme came to €4.34bn.
At end-2022, this strategy was still suspended. The interest-rate swaps programme may nevertheless be revived if warranted by market conditions.