The OAT market for retail investors

AFT, in partnership with Euronext and the primary dealers, has established a secondary market where retail investors can easily buy and sell OATs, which are bonds issued by the French Republic that are backed by the full faith and credit of the State. Retail investors can purchase fixed-rate OATs with maturities ranging from 2 to 50 years. These bonds have annual coupons and are redeemable at maturity. Retail investors may also buy index-linked OATs.

Anyone can access the OAT market. OATs offer private individuals numerous advantages, including a regular income, protection against inflation, a source of capital to supplement their pension or finance a project in the future, or a means of diversifying their assets.

An organised secondary market

Like any other negotiable security, OATs can be sold on the stock exchange at any time for the market price. The Government took steps to modernise the OAT market in 2005 to ensure that it met retail investors’ needs. The retail OAT market is managed by Euronext. It operates under the stock market regulations in force and complies with transparency and disclosure rules. This market provides:

  • liquidity: OATs are highly liquid. Financial institutions acting as market makers ensure the market, overseen by Euronext, remains liquid.
  • acceptance of orders: orders can be placed through traditional or online financial intermediaries.

Tax treatment of OATs

Since 1 January 2013, interest on OATs and government bonds received by individuals domiciled in France for tax purposes has been, with some exceptions (see below), liable to progressive income tax in the year following its receipt after being subject, in the year of receipt, to a withholding tax (“advance payment”) of 24% (plus social contributions totalling 15.5% on investment income). This advance payment is then deducted from the tax calculated at progressive rates. Any excess payment is refundable.

If the total income from fixed-income investments, including interest on OATs and government bonds, received for a given year by a tax household does not exceed €2,000, the taxpayer may opt for a flat-rate income tax of 24%. The taxpayer must choose this option when filing his or her general income-tax return. When the income payments exceed €2,000, they are liable to a tax assessed on the progressive income tax scale.