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Christine Lagarde, Minister of the Economy, Finances and Industry, has approved the indicative financing programme of the French Republic for 2011.
In 2011, the State budget deficit will amount to €91.6bn, the redemptions of long- and medium-term debt will amount to €94.8bn and the redemptions of other debts will amount to €0.6bn. The State funding requirement will therefore come to €187bn.
This funding requirement will be covered by medium- and long-term borrowing (BTAN & OAT) up to €184bn net of buybacks, and the cancellation by the Caisse de la Dette Publique of €2.9bn of securities. The short-term bills outstanding (BTF) will be decreased by €1.1bn.
The funding programme implements the 2011 Budget Law which sets a €89.2bn ceiling to the year-on-year increase of the long- and medium-term negotiable debt.
French CPI and eurozone HICP index-linked bonds will account for around 10% of medium- and long-term debt issuances. As in previous years, AFT will adjust issuances to match demand and to ensure the liquidity of the bonds.
In 2010, AFT conducted securities buybacks, with €18.2bn of debts maturing in 2011 and €4.5bn of debts maturing in 2012. Throughout 2011 and depending on market conditions, AFT will implement buybacks of securities falling due in the following years.
1. Long- and medium-term borrowing in 2011
Amount to be issued
Net issuances of medium- and long-term securities will amount to €184bn. As in the past, AFT will be allowed to operate debt buybacks and/or switches, depending on market conditions and financing needs.
Net issuances will include around 10% of inflation-linked bonds, the remaining issuances being distributed between BTANs and OATs. As in previous years, AFT will adjust issuances to match demand and to ensure the liquidity of the bonds.
2. Benchmark Lines Issuance Policy
AFT will issue in 2011, one new 2-year benchmark, two new 5-year benchmarks and one new 10-year benchmark. AFT will examine, in close cooperation with SVTs, the issuance of other new long-term benchmarks on the 15-year and the 30-year maturities, if the demand in 2011 justifies the introduction of new references.
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 2011, including a new 15-year benchmark on the European inflation (OAT€i) and a 5-year benchmark on the French inflation (OATi). In addition, AFT will continue to issue existing linkers, in order to meet investors demand.
3. 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.
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.
4. 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.
2010 Status Report
The 2010 gross medium- and long-term borrowing amounted to €210.7bn in face value, with fixed-rate OATs accounting for €102.4bn, linkers (OATis and OAT€is) for €20.4bn and BTANs for €87.9bn.
Agence France Trésor
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