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As in previous years, Agence France Trésor will work with the primary dealers to adjust its issuance to meet investor demand and ensure a liquid market for its securities. The borrowing programme calls for bonds linked to French inflation, combined with bonds linked to European inflation, to total approximately 10% of net medium- and long-term debt issuance.
AFT bought back €23.2bn in outstanding debt in 2013. This reduced redemptions of debt maturing in 2014 by €13.2bn and redemptions of debt maturing in 2015 by €10bn. Depending on market conditions in 2014, AFT could buy back debt maturing in later years.
1. 2013 status report
The gross face value of medium- and long-term debt issuance in 2013 stood at €192bn, consisting of €175.2bn in fixed-rate bonds (OATs and BTANs) and €16.8bn in inflation-linked bonds (OATis, OAT€is and BTANis). The proportion of securities issued with collective action clauses (CACs) stood at 55.4% of the total face value of debt issued, in compliance with the decision of euro area debt managers made on 18 November 2011.
The average weighted yield of medium- and long-term debt issuance in 2013 stands at a historic low of 1.54%, compared to 1.86% in 2012, and an average of 4.15% from 1998 to 2007.
2. Benchmark issues
AFT will issue one new 2-year benchmark, two new 5-year benchmarks and one new 10-year benchmark. AFT will also examine the prospects for issuing a new 15-year benchmark.
All benchmark bonds will be tapped so that outstanding amounts ensure a liquid market.
AFT will determine whether the time is right for new issues of inflation-linked bonds. More specifically, AFT will consider creating a new 10-year benchmark bond linked to the French inflation index (OATi). It will also look at the prospects for a new 15-year or 30-year benchmark bond linked to the European inflation index (OAT€i), depending on market demand. AFT will also continue to tap existing inflation-linked bonds.
AFT will determine whether the time is right to change the redemption date for the new OATs linked to French and euro area inflation from the current July redemption date.
3. Auction rules and Schedule
The first auction of long-term securities will be held on Thursday, 9 January 2014 and the first auctions of medium-term and inflation-linked securities will be held on Thursday, 23 January 2014. In the following months, OATs with maturities of more than 5 years will be auctioned on the first Thursday of each month and OATs maturing in 2 to 5 years will be auctioned on the third Thursday of each month at 10:50 am. There will be only one auction in both August and December; depending on market conditions and primary dealers’ recommendations, either medium-term or long-term OATs will be auctioned on the first Thursdays of these months.
As in previous years, AFT reserves the right to adjust its issuance of different securities to match demand by tapping securities that are not benchmarks.
Inflation-linked securities will be auctioned at 11:50 am on the third Thursday of each month, except in August and December.
In accordance with the new provisions stemming from the entry into force of the European Central Securities Depository Regulation (CSDR), all trades on the secondary market made through regulated markets will be settled at T+2, or two days after the trade date, starting on 6 October 2014. More specifically, this concerns trades in OATs and BTANs, which will be settled at T+2 (instead of T+3 at present). The change will have no impact on the BTF trades, which are already being settled at T+2.
AFT will analyse the implications of potential harmonisation of auction settlement dates and market settlement dates.
4. Active debt management
AFT bought back €23.2bn in debt, including €13.2bn in securities maturing in 2014 and €10bn in debt maturing in 2015, in order to meet its net issuance target in 2013.
Tân Le Quang