03 July 1998: Inflation-indexed OATs

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In accordance with the announcement made by Dominique Strauss-Kahn on December 2, 1997, the French Treasury will issue inflation-indexed OATs from September 1998 onwards, market conditions permitting.

The general design features of inflation-indexed OATs have been decided as follows :

  • The reference index will be the consumer price index excluding tobacco for all households in France, published every month by the INSEE (Institut national de la statistique et des études économiques, France's national institute for statistics and economic research).
  • The principal of the inflation-indexed OAT is adjusted to this inflation index, in order to factor in price changes. The inflation premium coming from this adjustment is paid with the principal when the bond is redeemed.
  • Reimbursement of the inflation-indexed OAT is guaranteed at par : in case the inflation index at maturity is lower than the inflation index on issue, reimbursement is equal to the par amount of the security on the date of original issuance.
  • The inflation-indexed OAT pays an annual coupon calculated as a fixed percentage of the inflation-adjusted principal. This coupon, called "real coupon", is determined on issue and remains unchanged until maturity.
  • The indexation of principal and coupons is implemented on the basis of a daily inflation reference, calculated by linear interpolation of the two latest monthly inflation indices published by the INSEE. Thus, the delay between the date of indexation and the date when inflation was measured is lower than 3 months.

All these characteristics will have to be validated and outlined in greater detail by the Comité de Normalisation Obligataire (CNO), charged with laying down standard bond rules. They will be published later.