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1. The reference index used for the indexation of the OATis is the consumer price index excluding tobacco for all households in France, calculated by the Institut national de la statistique et des études économiques (INSEE, France's national institute for statistics and economic research).
The INSEE regularly changes the base year of its consumer price index (CPI), every 5 to 10 years. This is necessary to keep the index relatively uniform over time. A base year change is an opportunity to make improvements in methods, classification and coverage.
As announced at the launch of the OATi in September 1998, the INSEE introduced in February 1999 a renovated CPI, base 100 in 1998. This new index replaces the old base 100 = 1990 price index.
The main progresses brought by this new index are : the widening and the improvement of the index theoretical and effective sectorial coverage, the integration of French overseas departments, a renovated fresh products base, a new classification of products consistent with the most recent international classifications, new weights, and various methodological improvements, notably concerning the collection of observations, the way missing values, rebates, information, and changes in products.
2. On this occasion, the two series of indices are published for the whole year 1998. The base year change in the French CPI implies for users a chaining of the two series, on the basis of the December 1998 CPIs.
This operation does not affect retroactively the index ratios which are used for the calculation of the flows (principal, coupon) paid by the OATi. However, it implies a resetting of the base for daily inflation references, as they will be computed from March 1999 on the basis of "base 1998" CPIs.
The key factor enabling the passage from daily inflation references (DIR) in base 1990 to base 1998 is the following ratio :
KEY = CPI Dec98 (B98) / CPI Dec98 (B90) = 100.0/114.9 = 0.87032.
DIR (B98, date d) = DIR (B90, date d) x KEY.
Thus, the index ratios for March 1999 are computed on the basis of the following CPIs (excluding tobacco prices):
- January 1999 CPI (base 1998 = 100) : 99,6.
- December 1998 CPI (base 1998 = 100) : 100,0.
- November 1998 CPI (base 1990 = 100) multiplied by the key : 114,8 x KEY = 99.9129678.
The method for resetting daily inflation references is detailed in the "Investors' Guide" available on line on the French government securities' Internet, Bloomberg et Reuters sites.