On the basis of the 2021 Budget Bill, which provides for medium- and long-term borrowing (OATs) of €260bn, net of buybacks, which is an identical amount to 2020, Bruno Le Maire, Minister for the Economy, Finance and the Recovery, has approved the indicative State financing programme for 2021.
A potential upward adjustment of the fiscal deficit between now and the adoption of the 2021 Budget Act, which is currently being discussed in Parliament, will not affect medium-and long-term debt issuance, net of buybacks, and will be covered by an increase in the outstanding amount of short-term securities and the use of other cash sources. The corresponding adjustment of the State financing programme for 2021 will be published soon after the adoption of the 2021 French budget Act.
As in previous years, Agence France Trésor will adjust its debt issuance programme to meet demand and guarantee a liquid market for its securities. The programme stipulates that bonds linked to French and European inflation indices will account for approximately 10% of net medium- and long-term debt issuance.
AFT may buy back debt in 2021 (BTFs and nominal and index-linked OATs) depending on market conditions.
Besides, it has been decided that a new repo facility could be created, to be managed by the Caisse de la dette publique (CDP). This tool would allow, if needed, to mobilise cash up to €20bn through short term repurchase agreements. Be it created, this facility would be announced through a dedicated communiqué.
1. New bonds
- AFT will auction one new 3-year benchmark, one new 5-year benchmark and one new 10-year benchmark.
- AFT will also examine, together with the primary dealers, the prospect of a syndicated issue of a new 50-year bond depending on market conditions.
- AFT will carry out the syndicated launch of a second green bond with a maturity of around 20 years, depending on market conditions. AFT will also continue to tap the first green bond issued in January 2017 to meet market demand. These operations will take place up to the limit of eligible green expenditure for 2021 whose amount will be communicated in January.
- In the second half of the year, AFT will examine, together with the primary dealers, the prospect of a syndicated issue of a new 30-year bond depending on market conditions.
Regarding inflation-indexed bonds, AFT will issue by auction a new 10-year OAT indexed to the euro-area consumer price index (OAT€i). In addition, depending on to the evolution of market conditions throughout the year, AFT will also examine the opportunity of issuing by auction a new 10-year OAT indexed to the French consumer price index (OATi).
Finally, AFT will keep tapping all of the existing nominal and European and French inflation-indexed bonds, depending on demand for them.
2. Auction rules and schedule
An auction of nominal and/or inflation-linked OATs may take place on the first Thursday of the month in December, depending on market conditions and after consultation with primary dealers. During the other months of the year, OATs with maturities of more than 8.5 years will be auctioned on the first Thursday of each month and OATs maturing in 2 to 8.5 years and inflation-linked OATs will be auctioned on the third Thursday of each month.
Auctions of nominal bonds will be held at 10.50am (Paris time), and auctions of inflation-linked bonds at 11.50am (Paris time). BTFs will be auctioned every Monday at 2.50pm (Paris time).
AFT will inform the market of any changes to the auction schedule.
Regarding the securities to be auctioned, as in previous years, AFT reserves the right to adapt its issuances by adjusting the composition of benchmark bonds and off-the-run bonds in response to demand from investors as estimated by the primary dealers. AFT may also act on primary dealers’ recommendations to tap non-benchmark BTFs.
3. Managing average debt maturity
The strategy to reduce the average maturity of negotiable government debt initiated in 2001 has been put on hold. The interest rate swap programme will resume if and when market conditions allow.
4. 2020 financing programme status report
The gross nominal value of medium- and long-term debt issuance in 2020 stood at €289.5bn, consisting of €269.4bn in fixed rate bonds and €20.1bn in inflation-linked bonds.
In 2020, AFT bought back €22.8bn in debt maturing in 2021 and €6.7bn maturing in 2022.