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Christine Lagarde, Minister of the Economy, Industry and Employment, has approved the indicative financing programme of the French Republic for 2009.
In 2009, the State budget deficit will amount to €79.3bn, the redemption of long- and medium-term debt will amount to €110.8bn and the redemption of other debts will amount to €1.6bn. The State funding requirement will therefore come to €191.7bn.
This funding requirement will be covered by medium- and long-term borrowing (BTAN & OAT) up to €145bn net of buybacks, and the cancellation by the Caisse de la Dette Publique of €2.5bn of securities. The short-term bills outstanding (BTF) will be increased by €23bn. Cash raised at end-2008 and deposited on the Treasury account will also be disbursed for an amount of €19bn.
The funding programme implements the 2009 Modified Budget which sets a €34.3bn ceiling to the year-on-year increase of the long- and medium-term negotiable debt. The BTF outstanding amount will be increased from €138bn at the end of 2008 to €161bn at the end of 2009.
French CPI and eurozone HICP index-linked bonds will account for around 10% of medium- and long-term debt issuance. As in previous years, AFT will adjust issuance to match demand and to ensure the liquidity of the bonds.
Securities buybacks in 2008 made it possible to reduce the amount of debt redemption maturing in 2008 by €2.3bn. Throughout 2009 and depending on market conditions, AFT will implement buybacks of securities falling due in the following years, including at least €2.5bn by the Caisse de la Dette Publique.
1 - Long- and medium-term borrowing in 2009
Amount to be issued
Net issuance of medium- and long-term securities will amount to €145bn. 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 include around 10% of inflation-linked bonds, the remaining issuance being distributed between BTANs and OATs.
As in previous years, AFT will adjust issuance to match demand and to ensure the liquidity of the bonds.
Benchmark Lines Issuance Policy
AFT will issue in 2009 two news 5-year benchmarks and one new 10-year benchmark of maturity October 2019. In addition, a new September 2011 BTAN will be created. AFT will examine, in close cooperation with SVTs, the issuance of other new long-term benchmarks.
All benchmark lines will be tapped to ensure their liquidity by providing a sufficient outstanding.
Regarding inflation-linked lines, AFT will examine the opportunity to issue new bonds. In addition, AFT will continue to issue existing linkers, in order to meet investor demand.
Auction Schedule and Rules
In August and December, a single auction, of either BTAN or OAT or both, depending on advices from SVT, will take place on the first Thursday of the month. The other months, OAT will be auctioned on the first Thursday of the month, and BTANs on the third Thursday. Exceptionally however, the OAT auction due to take place on Thursday 1 January 2009 will be postponed to 8 January 2009, while the following BTAN auction will be delayed until Thursday 22 January 2009.
As regards the lines to be auctioned, AFT retains, as in previous years, capacity to adjust to final demand as reported by the SVTs and tap non-benchmark lines or tap, at BTAN auctions, OATs with a less-than-5-year remaining maturity.
Index-linked bond auctions will take place every third Thursday of the month, at 11:50 am (Paris time), except in August and December.
2- Short-term financing in 2009
According to the programme decided by the Minister, the BTF outstanding amount will be increased by €23.0bn to reach a provisional outstanding of approximately €161.0bn at the end of 2009.
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 possible additional lines according to demand and to the needs of short-term cash reserve management.
As in 2008, issuance of the 3-month, 6-month and 12-month securities will be implemented in order to maximise investors opportunities throughout the year.
Very short-term BTF with maturity ranging from 2 to 6 weeks may also be issued to manage infrequent cash situations.
3 - 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 - The SVT charter and the SVT selection
In partnership with SVTs, the AFT will revise the SVT charter, which describes its relationship with the primary dealers. The updated charter will be made public and the triennial reselection of SVTs will occur, on this basis, mid-2009.
5 - 2008 Status Report
The 2008 gross medium- and long-term borrowing amounted to €132.0bn in face value, with fixed-rate OATs accounting for €63.9bn (including €1.4bn of OAT October 2038 issued during the 4 December 2008 debt exchange transaction), linkers (BTAN€i, OATis and OAT€is) for €15.5bn and BTANs for €52.6bn (including €0.8bn of BTAN with a remaining maturity of less than one year issued during the 21 July 2008 BTF auction). Furthermore, as of today, OTC buybacks executed by the State totalled €2.3bn of securities maturing in 2009 and €1.1bn of securities maturing in 2032 have been bought back during the 4 December 2008 debt exchange transaction.
The net issuance programme for 2008 amounts to €128.5bn, including €11.5bn used to fund the Société de prise de participation de l'Etat (SPPE) a fully State-owned corporation dedicated to invest in securities issued by financial institutions.
Agence France Trésor
Pierre Salaun :
+33 1 40 04 15 50
+33 6 72 24 03 88