06 December 2000: French government Indicative financing programme for 2001

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As announced, Laurent Fabius, Minister of the Economy, Finance and Industry, has decided to modernise French government debt management. His objective is to make French government securities the benchmark on the European government bond market, in order to reduce budgetary charges and to improve the general financing conditions of the French economy. This initiative, which is part of the government's overall reform strategy, hinges on the following concrete initiatives:

1) The creation of a debt management agency, scheduled to be operational by the end of December. Already set up, this unit has national jurisdiction and will be staffed by market professionals picked to complement the France Trésor teams. Recruitment is already underway. The Agency will directly manage all budgets connected with government debt and cash management, including the IT and communication budgets. Chaired by the Treasury Director and managed by Sylvain de Forges, it aims to develop and implement an increasingly effective and innovative borrowing policy. New and flexible resources will enable it to provide the necessary support for an increasingly pro-active management strategy.

2) The creation of a trade account. Proposed by the government in an amendment to the Supplementary Budget Act, this initiative is currently before Parliament. This account will provide a transparent record of all active debt management transactions authorised by Parliament. In 2001, the government will gradually build up a low-risk swap portfolio designed to optimise the government's financial charges in the light of interest rate fluctuations.

3) Laurent Fabius has also decided to accelerate announcement of the outline of the government funding programme for 2001. The amount of net medium and long-term issues needed to cover the government borrowing requirement will be lower than in 2000, inter alia because of government measures to reduce the budgetary deficit.
This decrease, which contrasts with the borrowing programmes of our main partners in the euro zone, makes our debt more attractive and should enable us to improve our borrowing terms.
The amount of net government securities issued in 2001 will be EUR 78 billion. This amount should be covered by net OAT issues of about EUR 42 bn and net BTAN issues of about EUR 36 bn.

4) The success of the repurchase programme of EUR 10 billion announced last July confirmed the relevance of this strategy. The government has already achieved its securities repurchase objective by a series of reverse auctions. This was the first time that this technique was used on such a large scale. Repurchase of these high-interest securities will slash budgetary charges by almost FRF 4 billion from the budget for 2001 onwards. The government does not rule out further repurchases next year.



Outline of government funding program for 2001

Mr Laurent Fabius, Minister of the Economy, Finance and Industry, has adopted the outline of the government funding programme for 2001

Results for 2000: the government will complete its entire medium and long-term gross borrowing programme for 2000 (EUR 48 bn worth of Obligations Assimilables du Trésor - OAT - and EUR 42 bn worth of Bons du Trésor à intérêts annuels - BTAN). Moreover, France Trésor repurchased EUR 10 bn worth of securities through four reverse auctions and several private transactions, which enabled it to achieve its objectives. This repurchase campaign combined attractive prices with preservation of overall debt liquidity.
The general increase in interest rates made it impossible to keep financing terms at the low level reached in 1999. As a result, the average borrowing rate rose to 5.08% for BTANs and 5.43% for the 10-year OAT. The average maturity of the negotiable debt on 31 October 2000 was about 6 years and 90 days, compared with 6 years and 99 days on 31 December 1999. Internationalisation of the French debt continued. As of end-September, 28.4% of the debt was held by non-resident investors.

Programme for 2001: the amount of net medium and long-term issues needed to cover the government borrowing requirement will be lower than in 2000, inter alia because of government measures to reduce the budgetary deficit. This amount will be about EUR 78 bn. It should be covered by net OAT issues of about EUR 42 bn and net BTAN issues of about EUR 36 bn. These estimated objectives reflect net receipts for each class of securities, as applicable after exchange for new issues or repurchase during the year.

  2000 2001
Borrowing requirement
Budgetary deficit (1) 209.0 31.9 186.0 28.4
Government commitments 8.0 1.2 8.4 1.3
Long-term debt redemption 93.0 14.2 99.7 15.2
Medium-term debt redemption 283.0 43.1 239.5 36.5
UMTS receipts earmarked for CADEP     -14.0 -2.1
Total 593.0 90.4 519.5 79.2
Funding sources
OAT 314.9 48.0 276.2 42.1
BTAN 275.5 42.0 249.9 38
Repurchased debt (2) -65.6 -10.0 -14.0 -2.1
Net medium and long-term financing 524.8 80.0 512.1 78
Net change in BTFs 66.9 10.2 42.7 6.3
Change in Treasury correspondents' deposits -82.2 -12.5 -34.0 -5.2
Change in the Treasury account (3) 83.5 12.7 0.0 0.0
Total 579.0 88.3 520.8 79.2
The figures in italics will be adjusted to reflect the outturn at the end of the year
(1) Budgetary deficit of the Supplementary Budget Act for 2000 and the Initial Budget Bill for 2001
(2) Debt repurchased by France Trésor in 2000 and debt to be repurchased by Caisse d'Amortissement de la Dette Publique (CADEP) in 2001 (insofar as known)
(3) A plus sign indicates a decrease in the Treasury liabilities at the Banque de France

We have not changed the principles and conditions of our issuing policy save for a few specific points. It should be remembered that:

  • the agency reserves the right to issue securities other than benchmark securities during the year if there is a demand among market operators. Similarly, the agency reserves the right to issue only one security when launching a new OAT or BTAN;
  • the OAT programme for retail investors will be continued on the technical terms in force in 2000;
  • France Trésor will regularly continue to issue new lines of existing variable-rate OATs and OATi. In close collaboration with the primary dealers (SVTs), France Trésor will also examine the feasibility of issuing new bonds in each of these compartments. This will depend on market conditions;
  •  moreover, in order to match supply and demand as precisely as possible, the Treasury has slightly modified its OATi auction policy: in the future, it may issue OATi on the afternoon of OAT or BTAN auctions.

In 2001, two new 5-year benchmark BTANs will be issued. From now on, the agency will publish a quarterly update on scheduled BTAN lines.
Organisation of a debt management agency: to be launched officially before the end of the year, this agency will be charged with government debt and cash management. To enable it to accomplish this assignment on optimum conditions, its organisation will consist of several units or departments charged respectively with:


  • market transactions, notably debt instrument issues and auctions, loan exchanges and repurchases, and derivatives transactions;
  •  back office operations and risk control;
  • management of the government's cash position, including projections, exchange with Treasury correspondents and investment transactions;
  • communication on government securities and relations with market operators and investors;
  • follow-up and analysis of developments on the rate markets and relations with financial analysts.

The agency will have the human and technical resources necessary to accomplish its assignments. It has already begun to hire market professionals. This recruitment drive will be maintained in 2001. The agency will manage all budgets connected with government debt and cash management, including IT and communication.
In order to make these services as transparent and understandable as possible, the government has submitted an amendment to the Supplementary Budget Act for 2000, which provides for the creation of a trade account entitled "active government debt management". This account will record the receivables and payables of the active management transactions authorised by Parliament, i.e.:
- currency and rate swaps;
- purchase and/or sale of government securities options or futures.
This account will track these transactions according to the rules of France's general business accounting plan, which will facilitate understanding and permit useful comparisons with other bond issuers in France and other countries.
Every year, a report on the transactions recorded in this account and on government debt management will be annexed to the Budget Bill. Moreover, this trade account will be subjected to a contractually agreed annual audit, focusing on the financial statements, the prudential procedures and the overall activity of the agency as well as their impact on the cost of debt.
Designed to ensure even more active government debt management, the above initiatives need to be accompanied by a pro-active policy of transparency and information for Parliament and our fellow citizens.