09 January 1998: French government indicative financing programme for 1998

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Mr Dominique Strauss-Kahn, Minister of the Economy, Finance and Industry, has approved the outline of the government funding programme for 1998
In contrast with recent years, government borrowing volume will be significantly down on the year before

1. Following the repurchases on the Secondary Market, the medium- and long-term funding program for 1997 was fully completed (103.1%). Obligations Assimilables du Trésor (OATs) accounted for FRF 333 billion while Bons du Trésor à Intérêts Annuels (BTANs) accounted for FRF 286 billion. FRF 11.7 billion of securities with maturity in 1998 were repurchased on the Secondary Market.
The general decrease in interest rates made it possible to obtain more favorable borrowing terms than in 1996. Thus, the average borrowing rate came down to 4.36% for BTANs (against 5.33% in 1996) and 5.66% for 10-year OATs (against 6.36% in 1996). On 31 December 1997, the average maturity of French Treasury negotiable debt stood around 6 years and 80 days, against 6 years and 47 days on 31st December 1996. The objective to stabilize the average maturity of negotiable debt between 6 and 6 and a half years was therefore reached and will be maintained in 1998.

2. In 1998, the volume of medium- and long-term issues necessary to meet the government borrowing requirement will be approximately FRF 590 bn, less than in 1997, notably due to the government measures to reduce the budgetary deficit. This volume should be covered by about FRF 320 billion worth of OAT issues and about FRF 270 billion worth of BTAN issues.

For each type of security, these targets correspond to cash revenue net of the value of securities, if any, exchanged for new issues or repurchased during the same year.



Borrowing requirement (FRF bn) 1997 1998
Budget deficit (*) 270.7 257.8
Government commitment 37 15.4
Long-term debt redemption 185.8 (1) 71.2 (1)
Medium-term debt redemption 167.5 (1) 263.6 (1)
TOTAL 661 608
Funding sources (FRF bn) 1997 1998
OAT 333.2 (2) 320
BTAN 285.7 (2) 270
Net change in BTF -0.2 18
Miscellaneous (**) 37.5 -
Change in Treasury account 4.8 -
TOTAL 661 608

* Budget Act forecasts (provisional data)
** France Télécom payment
(1) after impact of repurchase of securities on the Secondary Market
(2) Cash issues net of repurchases

3. OAT sales to retail investors will continue throughout the year. This standard savings product is part of the range of instruments available to individuals. Thus, the OATs placed in 1998 will be charged to the total objective of FRF 320 billion.

4. The Treasury issuing policy for 1998 is to be seen in the context of the introduction of the euro on 1 January 1999. From this date, government securities will be issued in euros and the entire outstanding debt will be redenominated into euros on the terms indicated in September 1997. Moreover, the following changes will occur:

  • The government will remain open to suggestions from investors in order to satisfy their expectations as best as possible. Accordingly, it will issue liquid securities to remain positioned on the entire yield curve, including the long part. Market conditions permitting, the government will therefore enrich its range of long-term bonds in the first half of 1998 with a new 2029 bond, set to become the 30-year euro-denominated benchmark.
  • As Mr Dominique Strauss-Kahn announced during the symposium on "Government Securities and the Euro" held on 3 December 1997, France will issue a new type of bond in the first half of 1998, linked to inflation. The exact characteristics of this bond and its launch procedure are currently being prepared in collaboration with the French Primary Dealers (SVT).
  • The French government will maintain its ECU issuing policy, which it will align even more closely with its franc issuing policy in order to make these two markets entirely fungible with the euro market. Accordingly, the government will not only systematically issue franc and ECU-denominated securities with the same characteristics in order to ensure their fungibility on 1 January 1999, but may also engage in active ECU-denominated debt management, including repurchases, exchange offers and reverse auctions, in order to optimize the liquidity of ECU-denominated securities in 1998 and after.

OAT: Treasury bond
BTAN: fixed-rate Treasury note
BTF (Bon du Trésor à Taux Fixe et à Intérêt Précompté): fixed-rate
Treasury bill