31 December 1998: French government funding programme for 1999

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Dominique Strauss-Kahn, Minister of the Economy, Finance and Industry, has now finalized the outline of the French government indicative funding programme for 1999.

1. The medium- and long-term borrowing program for 1998 was successfully completed. Following repurchases on the secondary market (FRF 11 billion of securities with 1999 and 2000 maturity), this program came to FRF 601.4 billion (101.9%). Obligations Assimilables du Trésor (OATs) accounted for FRF 336.5 billion, while Bons du Trésor à Intérêts Annuels (BTANs) accounted for FRF 264.9 billion. were repurchased on the Secondary Market.
The general decrease in interest rates made it possible to obtain very favourable borrowing terms. Thus, the average borrowing rate came to 4.07% for BTANs (against 4.36% in 1997) and 4.73% for 10-year OATs (against 5.66% in 1997). On December 31, 1998, the average maturity of French Treasury negotiable debt stood at 6 years and 93 days, compared with 6 years and 57 days on December 31, 1997. The objective to stabilize the average maturity of negotiable debt between 6 and 6 and a half years will be maintained in 1999.
2. Sharp fall in issuance in 1999, notably due to the reduction of budget deficit carried out by the government : the volume of medium- and long-term issues will total approximately 80 billion euros, down by 11 billion euros compared with 1998. This volume should be covered by about 45 billion euros' worth of OAT issues and about 35 billion euros' worth of BTAN issues.
For each type of security, these targets correspond to cash revenue net of the value of securities, if any, exchanged for new issues or repurchased during the same year.

  1998 1999
Borrowing requirement EUR (2) FRF EUR (2) FRF
Budget deficit (1) 39.30 257.8 36.07 236.6
Redemption of debts taken over by the government 2.35 15.4 1.54 10.1
Redemption of long-term debt 10.85 71.2 12.01 (3) 78.8
Redemption of medium-term debt 40.19 263.6 29.65 (3) 194.5
TOTAL 92.69 608 79.27 520
Funding sources 1998   1999  
OATs 51.30 (4) 336.5 45 295
BTANs 40.38 (4) 264.9 35 230
Medium and long-term borrowing 91.68 601.4 80 525
Net change in BTFs + 5.95 + 39 + 3.80 + 25
Net change in Treasury account - 4,94 - 32.4    
Variation of deposits     -4.57 - 30
TOTAL 92.69 608 79.27 520

Provisional data for 1998
(1) Budget Act forecasts
(2) Euro conversion rate: 1 EURO = 6.55957 FRF.
(3) Taking into account the impact of repurchases of securities maturing in 1999 on the secondary market


3. OAT sales to retail investors will be extended to inflation-indexed OATs, in order to give retail investors access to a diversified range of government securities, based on their specific needs, under the same terms of transparency and liquidity as institutional investors. These securities may be purchased by private investors anywhere in the euro area. The OATs placed in 1999 will be charged to the total objective of 45 billion euros.

4. French government securities in the heart of the euro. In order to position French government securities as benchmark instruments on the euro government bond market, the French issuing policy will stick in 1999 to its principles of regularity, transparency and liquidity.
The Treasury will issue liquid securities to remain positioned on the entire euro yield curve. 10-year (4% April 2009 OAT) and 30-year (5.5% April 2029 OAT) benchmark securities will be auctioned regularly to maintain optimal liquidity and meet investor demand. A new 5-year BTAN maturing in July 2004 will be created in January 1999
Like other floating-rate OATs, inflation-indexed OATs (OATi) are now an integral part of the French Treasury's issuing policy : approximately 6 billion euros' worth of OATis will be issued at regular intervals in 1999, either by complementing the existing line (3% July 2009 OATi) or by creating a new OATi, to establish a second point on the euro-denominated real yield curve. Auctions will take place on the same days as the other OATs.
Finally, the Government will carry on its active debt management policy, through repurchases, exchange offers and reverse auctions, in order to optimize the liquidity and the transparency of prices of euro-denominated French government securities. Over-the-counter repurchases of short-maturity securities will be possible throughout 1999.


This 1999 funding program 1999 is part of the threefold fiscal strategy of the French government : funding government priorities while containing the growth of public spending ; reduce the level of public debt ; carry on the decrease of taxes and social security charges, in accordance with the trend of economic growth.
It also illustrates Dominique Strauss-Kahn's action in favor of an innovative and dynamic financial market in Paris, dedicated to growth and job creation.

Indicative calendar of French Treasury auctions for 1999

1. Every Monday, the French Treasury will auction negotiable fixed-rate short-term discount Treasury bills (BTF). The auctions will include at least one 13-week Treasury bill and, alternately, a 6-month or 1-year Treasury bill.

2. On the first Thursday of each month, the French Treasury will auction the following OAT lines:


  • a fixed-rate 10-year bond, either the existing 4% April 2009 OAT or a yet-to-be-created OAT with maturity 2009 or 2010 ;
  • market conditions permitting, other fixed-rate (notably the 30-year OAT 5.5% April 2029), floating-rate (OAT TEC 10) or inflation-indexed (OATi) bonds.

In the event that an auction involves floating-rate securities (OAT TEC 10) or inflation-indexed OATs (OATi), specific information will be provided about the amount to be issued on the above issues. Moreover, any auction of inflation-indexed OATs will be announced at least one week in advance.

3. On the third Thursday of each month, the French Treasury will auction notes from at least one issue of 2- or 5-year BTANs. Other medium-term securities - OATs or BTANs - may also be auctioned at the same time.

4. The Treasury may conduct securities exchange or repurchase transactions as well as currency and interest rate swaps, by tenders or syndication. The volume of securities outstanding and the volume of securities cancelled during the previous month as a result of any of these transactions will be published at the end of each month, as is standard practice for negotiable public debt.

5. The Treasury may repurchase or exchange Treasury securities through over-the-counter transactions throughout the year, as part of its active debt management policy.

6. The Treasury reserves the right not to proceed with any of the aforementioned auctions in the event of exceptional market circumstances, or to hold an additional auction, depending on its borrowing requirement and the market conditions.
Moreover, the Treasury reserves the right to create new long- and medium-term issues during the year or to tap again previously issued lines, depending on market conditions. It further reserves the right to resort to bank syndication procedures. On each occasion, the precise nature of the issues auctioned by the Treasury, together with information concerning the volume of the auction, will be made public several days before the issue.

7. Finally, on the occasion of the changeover to the euro, the State as an issuer will adjust its procedures to bring them in line with euro area business days: coupon payment and redemption of matured securities will be done in accordance with the TARGET, no longer the French, business day schedule.