18 February 2005: Introducing the 50-year OAT: The New Frontier of the Euro Fixed Income Market

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Growing interest on the markets for very long-term placements led Agence France Trésor to ask, on February 3, 2005, a number of primary dealers (SVT) to carry out a world-wide survey of investors in order to examine the pertinence of issuing a very long maturity bond. 

As a result of the very positive feedback from the survey, AFT has decided to proceed with the issuance of the 50-year euro-denominated OAT 2055. This issuance will be syndicated and will take place in the coming week, if market conditions allow. 

The 21 primary dealers (SVT) are members of the syndicate. 
Lead managers are: Barclays Capital, BNP-Paribas, Deutsche Bank and HSBC - CCF.
Senior co-lead managers are: CSFB, IXIS CIB and JP Morgan. 

Bertrand de Mazières, CEO of AFT said " With this new OAT, we are opening the new frontier of the Euro fixed income market. There is a structural demand for very long dated maturities and this market segment is now ready to fully develop". 

Benoît Coeuré, deputy CEO of AFT emphasised that "this new OAT will be part of the State funding programme, as well as the other French sovereign bonds, and will share the same features of transparency and liquidity". 

Furthermore, two presentations of the survey results have been organised for investors on Friday, February 18, simultaneously in Paris and in London. These events are also open to journalists. 

Paris: 12:30pm, Paris time, at Pavillon Gabriel (5, avenue Gabriel - Paris 75008) 
London: 12:30pm, London time, at The Grocers' Hall (Princes Street - London EC2R 8AD) 

Brief Summary of the Survey Results

A sample of 550 investors, representative of the global fixed income community, have been polled on the feasibility of a new 50-year nominal OAT. 

The banks have limited the sample to those investors known as being active on the 10- to 30-year zone on the euro curve. As a result, the number of potential investors for this new issuance comes out at 400. All countries have been covered taking into account the major regions and the different categories of investors (asset managers, insurers, pension funds, banks, hedge funds, central banks and corporates). 

Investors having shown strong or potential interest for this transaction account for nearly 49%: 
- The distribution of the above investors is as follows: UK/Ireland (29%), Holland (17%), Italy (11%), Germany and Austria (16%), France (10%), Scandinavia (6%) and United States (3%). 
- The distribution by investor type shows active demand from all categories: asset managers (48%), banks (21%), insurers (13%), pension funds (11%), central banks (3%), hedge funds (2%) and corporates (2%). 
- The demand is important and likely to be recurrent. For 71% of investors, interest will not be limited to a single issuance.
- For a large number of investors, the liquidity factor plays an important role and 74% of investors are asking for a "benchmark size" in a new issuance. 
- For a large number of investors, the inscription of a new 50-year bond in the major indexes is very important. 

The survey suggest that the main structural factors, calling for a new 50-year euro-denominated nominal OAT are: 

- Ageing population (smaller labour force, higher pension and health care expenditures).
- A need for long dated fixed income securities in order to address potential asset/liability mismatch of pension funds and insurance companies.
- Insufficient supply of prime quality long dated securities when most of sovereign issuance is concentrated on the 10-year and under maturities (longer then 10-year bonds account for 22% of European Union sovereign issuance). 
- Regulatory changes in Europe. 

Press Contact 
Corinne Dromer: 
+33 1 4004 1550 
+33 6 72 90 35 64