France will remain one of the biggest borrowers in the euro zone in 2022

Posted on Dec 8, 2019 2021 at 13:26Updated 8 Dec. 2021 at 13:27

A busy year awaits Agence France Trésor. Responsible for placing the State’s debt on the markets, it will have to carry out a medium and long-term financing program of 260 billion euros. This amount is similar to that of 2021, which was then a record. In particular, it takes into account an expected deficit of 155.1 billion euros against 143.4 billion provided for in the finance bill, because this now includes the 2030 investment plan and the cost of measures intended for the household. to limit the effects of inflation.

Favorable conditions in 2021

Above all, AFT will raise funds in a context that is apparently less easy than that of this year. “In 2021, acknowledges Cyril Rousseau, Managing Director of AFT, the financing conditions have remained very, very favorable”. Despite a roller coaster year. France’s 10-year rate moved to very low levels in the first quarter, then climbed 30 bps (bps) in the second quarter as the economy recovered and vaccination plunged again in the third quarter after the onset of the disease. variable delta before rebounding at the end of September against a background of rising inflation.

On average, France is financed, all maturities combined, at -0.28%, and at -0.05% for medium and long-term bonds (OAT). The average cost of France’s 2,000 billion euros of debt, on the other hand, rose slightly to 1.35% against 1.28% in 2020. A situation which is gradually explained by the increase in the cost for the State of inflation-linked bonds, in a context of rising prices. The average maturity of the debt has lengthened slightly, to 8.4 years.

Inflation and the ECB

Next year, the impact of inflation and the start of normalization of its monetary policy envisaged by the European Central Bank should weigh on French rates. AFT anticipates – cautiously – a 10-year rate at 0.75% at the end of 2022 and at 0.5% on average over the next year.

AFT plans to stabilize its BTF issues (debt securities with a maturity of less than 1 year). “The BTFs have played their role of first line of defense in the face of increased financing needs during crises, they will be less necessary next year,” explains Cyril Rousseau.

New OATs will be created by syndication, including a 15-year bond. “With the rise in rates, we believe that some investors – such as insurers – who had focused on securities longer than 30 or 50 years will revert to more traditional maturities. A bond with a maturity to be determined between 20 and 30 years should be launched.

Indexed bonds

Depending on market demand, France should issue several French and European inflation-indexed bonds, with a target of around 10% of the issuance program. AFT is considering the creation of a new green OAT, but which would be indexed to inflation. Preparatory work will be carried out in this direction.

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