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Christine Lagarde, Minister of the Economy, Finance and Employment, has approved the indicative financing programme of the French Republic for 2008.
In 2008, the State budget deficit will amount to €41.7bn, the redemption of long and medium term debt will amount to €97.6bn and the redemption of other debts will amount €2.4bn. The State funding requirement will therefore come to €141.7bn.
This funding requirement will be covered by medium- and long-term borrowing (OAT & BTAN) up to 116.5bn net of buybacks, and the cancellation by the Caisse de la Dette Publique of €3.7bn of securities. Furthermore, a €22.1bn increase of short-term bills outstanding (BTF) will finance an increase in the Treasury cash account of €2.1bn and withdrawals from Treasury Special Accounts of -€2.7bn.
The funding programme implements the 2008 Budget which sets a €16.7bn ceiling to the year-on-year increase of the long- and medium-term negotiable debt.
As during the last five years, French CPI and eurozone HICP index-linked bonds will account for at least 10% of medium- and long-term note issuance. AFT will be able to issue significantly more than 10% of its programme in inflation-linked bonds, if justified by demand.
Securities buybacks in 2007 made it possible to reduce the amount of debt redemption maturing in 2008 by €10.1bn. Throughout 2008 and depending on market conditions, AFT will implement buybacks of securities falling due in the following years, including at least €3.7bn by the Caisse de la Dette Publique.
APPENDIX. INDICATIVE FRENCH REPUBLIC FINANCING PROGRAMME FOR 2008
1 - Long- and medium-term borrowing in 2008
Amounts to be issued
Net issuance of medium- and long-term securities will amount to €116.5bn. As in the past, AFT will be allowed to operate debt buybacks and/or switches, depending on market conditions and financing needs.
Net issuance will be composed of inflation-linked bonds for at least 10% (i.e. €12bn or more), the remaining issuance being equally distributed between OATs and BTANs.
As in previous years, AFT will be able to issue significantly more than 10% of its programme in inflation linkers, if there is significant demand.
Benchmark Lines Issuance Policy
AFT will issue, in 2008, two new 5-year benchmarks and two new 10-year benchmarks. In addition, a new September 2010 BTAN will be created. All the benchmarks already created will be tapped to ensure their liquidity by providing a sufficient outstanding.
Regarding inflation-linked bonds, AFT will examine the opportunity to issue new bonds; In particular, the issuance, in 2008, of a new 15-year or longer index-linked bond on French inflation will be examined. In addition, AFT will continue to issue existing OATis and OAT€is, in order to meet investor demand.
Auctions Schedule and Rules
AFT will not auction in August and December. OATs will be auctioned on every first Thursday of the month, and BTANs on every third Thursday. The first OAT auction will take place on January 3, 2008.
As regards the lines to be auctioned, AFT retains capacity to adjust to final demand as reported by the SVTs and tap non-benchmark lines or offer only one single line at any given OAT or BTAN auction.
Index-linked bond auctions will take place on BTAN auction days, i.e. every third Thursday of the month, at 11:50 am (Paris time).
2 - Short-term financing in 2007
According to the programme decided by the Minister, the BTF outstanding amount will be increased by €22.1bn to reach a provisional outstanding of approximately €100.6bn at the end of 2008.
BTF auctions will take place every Monday and will include the issuance of 3-month BTFs, along with either 6-month or 12-month BTFs, as well as a possible additional line according to demand and to the needs of short-term cash reserve management.
As in 2007, issuance of the 3-month, 6-month and 12-month securities will be organised in order to maximise investors opportunities throughout the year.
As part of the new cash management policy, very short-term BTF with maturity ranging from 2 to 6 weeks will be issued to manage infrequent cash situations.
3 - AFT's debt management indicators and average maturity of debt management
The average debt maturity strategy initiated in 2001 remains on hold. The interest rate swap programme will be revived as soon as market conditions are favourable. AFT will inform market participants before resuming swap operations.
4 - 2006 Status Report
The 2007 gross medium- and long-term borrowing amounted to €107.6bn in face value, with fixed-rate OATs accounting for €45.3bn, linkers (OATis and OAT€is) for €18bn and BTANs for €44.3bn. Furthermore, buybacks, executed by the State and the Caisse de la Dette Publique (CDP), through one reverse auction and over-the-counter, totalled €10.1bn and included securities maturing in 2008.
The net issuance programme for 2006 will amount to €97.5bn.
Agence France Trésor
Pierre Salaun :
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