18 19 1 3 4 5 6 7 8 9 3 31 3 33 34 35 36 37 38 39 4 41 4 43 44 45 46 47 MonthlyBulletin n 3 3 4 M a r c h 1 8 Publication manager: Anthony Requin Editor: Agence France Trésor Available in Arabic, Chinese, English, French, Japanese, Russian and Spanish http://www.aft.gouv.fr Bloomberg TREX<GO> Reuters <TRESOR> News at Agence France Trésor page 1 Economic news page General debt-related data page 3 Secondary market page 5 Negotiable government debt page 6 The French economy and international comparisons page 8 Agence France Trésor is tasked with managing the government debt and cash positions under the most secure conditions in the interest of the taxpayer. News at Agence France Trésor France issued a syndicated 18-year OAT i at a record low in terms of real yield In accordance with the indicative State financing programme for 18, which was published in December 17, France issued by syndication a new 18-year OAT i. After an announcement the day before, AFT launched on Wednesday 8 March a syndicated bond that is linked to the euro area price index (excluding tobacco), the OAT i.1% 5 July 36. The issuance by syndication has encountered the investors' interest, with total demand of 11.5bn and allocation of 3.5bn. It represents the most important order book collected by AFT for the launch of an OAT indexed on inflation (OAT i). The real yield at issuance stood at -,361%, establishing a new record low in terms of real yield at issuance for an AFT syndication. 1 final investors took part in the deal. The allocation testifies to the size of the order book with a very diversified investor base, both in terms of the geographical and sector distribution of investors (see charts). Allocation of the OAT i.1% 5 July 36 is diversified in terms of investor and geographical distribution Hedge funds 1% Official institutions 9% Rest of the world 8% France 4% Banks 36% Asset managers 4% United Kingdom 37% Euro zone 13% 5 bn Insurers & Pension funds 1% With this issuance, France, which has committed to issue 1% of its annual State financing programme in index-linked securities, has reaffirmed its status as a benchmark issuer in the euro area for long-dated index-linked securities. The new 15 to -year benchmark bond is consistent with AFT s issuance strategy and its objective of having a smooth yield curve and good liquidity in every segment of the curve. French inflation-linked bonds outstanding Other Europe 18% bn 15 bn OAT i July 36 3,5 Md 1 bn 5 bn bn French inflation (OATi) European inflation (OAT i) 1
Jan-1 May-1 Sep-1 Jan-11 May-11 Sep-11 Jan-1 May-1 Sep-1 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 Economic news Bond markets after net PSPP purchases end Christophe Duval-Kieffer, Inflation strategist, Nomura Economic activity in the euro area was robust in 17, with real GDP 1 growth averaging.5%. In its latest set of economic projections, the ECB expects real activity to grow at a firm rate of.4% in 18, then slow to 1.9% in 19. The steady increase in activity should take underlying inflation back to target by, the ECB projections suggest, assuming net purchases by the PSPP end by September 18. Absent a negative surprise on activity, the ECB stance inclusive of an end to net purchases is therefore set to bring inflation back to target, albeit at a slower pace than usual. Euro area fixed income markets have started pricing in the increased likelihood of an interruption to PSPP net purchases in October, as the pricing in of the first deposit rate hike in the OIS 3 curve shows. So far the pricing in of an end to net purchases has been very orderly, with rates remaining low and sovereign spreads remaining tight. The transition in monetary policy instruments from a focus on net purchases and the deposit rate at the effective lower bound to a combination of reinvestment and forward guidance will nonetheless be accompanied by important changes for the French sovereign debt market. One aspect of the PSPP needs to be underlined as it is likely to be crucial during the unwinding of the programme; it pertains to the re-balancing of holdings of the euro area in general and French sovereign debt securities following the introduction of the PSPP. It is worth recalling that the launch of the PSPP was accompanied by a sharp depreciation in the exchange rate of the euro by about 1%. Consistent with this sharp exchange rate move, there is evidence that foreign holders of euro sovereign bonds sold their holdings to the Eurosystem as did investment funds, albeit to a lesser extent (see ECB bulletin 4/17 p.61). In other words, as the PSPP started foreign holders of euro area debt securities sold their holdings to the Eurosystem. Prospects of an end to net purchases have coincided with renewed demand from foreign investors, eager to rebuild their pre-pspp exposure. The gradual reappreciation of the euro since mid-17 suggests sustained portfolio rotation into euro area debt securities, probably made possible by the decrease in net purchase volumes from 8bn to 6bn in April 17 and from 6bn to 3bn after January 18. The magnitude of the rotation out of euro debt after 15 observed in the euro area balance of payments suggests that the current reverse rotation into euro debt securities is likely to persist, drawn by the substantial improvement in activity and consequently public finances. Also, FX-hedged yields on euro debt securities offer very substantial pick-up for some foreign investors against their respective domestic yields for example, over 1 basis points of pick-up for Japanese investors on French OATs. Meanwhile, the PSPP still operates with positive net purchases until September, while the demand for debt securities from pension funds and insurance will not abate; as a result, demand for euro debt securities has entered a sweet spot with foreign and domestic demand combining and resulting in very low yields and spreads. The steady increase in foreign demand should minimise the impact of the end to net PSPP purchases if the situation in public finances continues to improve and if the support from other monetary policy tools is withdrawn only gradually. 5 15 1 5-5 -1 Spread OATs versus JGBs, "in JPY" (basis points) Spread FR - JP Y Spread FR - JP 5Y Spread FR - JP 1Y Spread FR - JP 3Y Source: Bloomberg 1 Gross domestic product Public Sector Purchase Programme 3 Overnight Indexed Swap NB: this Agence France Trésor forum offers economists an opportunity to express their personal opinion. Thus, the above article strictly reflects the author s view, and should not be construed as expressing the viewpoints of Agence France Trésor or the Ministry of the Economy and Finance.
General debt-related data Indicative auction schedule Short-term Medium-term Long-term Index-linked April 18 auction date 3 9 16 3 3 19 5 19 settlement date 5 11 18 5 3 May 3 9 3 May 18 auction date 7 14 8 / 17 3 17 settlement date 9 16 4 3 / 1 7 1 anticipated or delayed auctions (bank holidays, etc.) Medium- and long-term negotiable government debt at 8 February 18 Nominal value of each line, in billion Medium- and long-term: securities issued during the year and total issuance at 8 February 18 5 1 15 5 3 35 4 45 OAT /1 OAT 3/3 OAT 5/4 OAT i 7/4 OATi 3/5 OAT 1/5 OAT i 7/7 OATi 3/8 OAT 5/8 OAT i 7/3 OAT 5/34 OAT 5/36 OAT i 7/47 OAT 5/48 OAT 5/66 issued before 18 issued in 18 Issuance net of buybacks at 8 February 18 18 16 14 1 1 8 6 4 31.6 19. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Medium- and long-term: provisional maturity schedule at 8 February 18 Month Coupon Redemption Mar-18. Apr-18 14.3 7.3 May-18 5.6 18. Jun-18. Jul-18.9 9.9 Aug-18 Sep-18 Oct-18 13.7 7.5 Nov-18 1.4 19.9 Dec-18 Jan-19 Feb-19 13.7 3
1/9 1/1 1/11 1/1 1/13 1/14 1/15** 3/16** 6/16** 9/16** 1/16* 3/17* 6/17** 9/17** 1/17** 55.8 55.1 58. 56.6 61.9 64. 63.5 63.6 61.9 61.3 59.8 6.1 58.7 67.8 67. General debt-related data Non-resident holders of negotiable government debt in fourth quarter of 17 As a % of negotiable debt outstanding expressed in market value Negotiable government debt by group of holders in fourth quarter of 17 Structure in % expressed in market value 7. 7. 68. 66. 64. 6. 6. 1.3 6.6 19. non-resident investors French insurance companies 58. 56. 54. 18. French credit institutions 5. 5. 48. French UCITS 55.1 others (French) (*) figures quarterly revised (**) figures annually revised Source: Banque de France Source: Banque de France Negotiable government debt at 8 February 18 In euros Total medium- and long-term debt 1,578,51,54,946 Total stripping activity 63,73,534,7 Average maturity 8 years and 17 days Total short-term debt 13,336,, Average maturity 11 days TOTAL OUTSTANDING 1,78,857,54,946 Average maturity 7 years and 31 days Negotiable government debt since 15 at 8 February 18 End 15 End 16 End 17 End Jan. 18 End Feb. 18 Negotiable government debt outstanding 1,576 1,61 1,686 1,71 1,79 of which index-linked securities 19 4 7 Medium- and long-term 1,44 1,487 1,56 1,579 1,579 short-term 153 134 16 131 13 Average maturity of the negotiable debt 7 years 7 years 7 years 7 years 7 years 47 days 195 days 96 days 75 days 31 days 4
1/16 /16 3/16 4/16 5/16 6/16 7/16 8/16 9/16 1/16 11/16 1/16 1/17 /17 3/17 4/17 5/17 6/17 7/17 8/17 9/17 1/17 11/17 1/17 1/18 Secondary market Yield curve for French government securities End-of-month value, % 4 Average daily volume of medium- and long-term transactions 18 3 16 14 1-1 1 yr 5 y rs 1 y rs y rs 3 y rs 5 y rs Source: Bloomberg /16 /17 /18 1 1 8 6 4 Source: reporting by primary dealers in government securities, excluding flows arising from the Eurosystem public sector purchase programme Total stripping and reconstitution 5 65 4 6 3 reconstitution stripping strips outstanding (->) 55 5 1 45 13 14 15 16 17 18 4 Source: Euroclear Primary dealers, repo outstanding at end of month 85 8 75 7 65 6 55 5 45 4 35 3 5 15 1 5 Fixed-rate Floating-rate Others 1/16 /16 3/16 4/16 5/16 6/16 7/16 8/16 9/16 1/16 11/16 1/16 1/17 /17 3/17 4/17 5/17 6/17 7/17 8/17 9/17 1/17 11/17 1/17 1/18 Source: reporting by primary dealers in government securities 5
Negotiable government debt Short-term debt at 8 February 18 Maturity Outstanding ( ) BTF 7 March 18 7,44,, BTF 14 March 18 5,841,, BTF 1 March 18 3,565,, BTF 8 March 18 6,7,, BTF 5 April 18 6,78,, BTF 11 April 18 5,63,, BTF 18 April 18 7,18,, BTF 5 April 18 5,795,, BTF 3 May 18 6,377,, BTF 9 May 18 5,68,, BTF 16 May 18 6,814,, BTF 4 May 18 6,98,, BTF 3 May 18 3,864,, BTF June 18 9,8,, BTF 4 July 18 6,333,, BTF 18 July 18 3,63,, BTF 1 August 18 3,73,, BTF 15 August 18 4,89,, BTF 1 September 18 1,947,, BTF 1 October 18 4,734,, BTF 7 November 18 4,847,, BTF 5 December 18,175,, BTF 4 January 19 5,57,, BTF 3 January 19 6,145,, Medium- and long-term debt (maturing 18-1) at 8 February 18 ISIN Code Bond Outstanding ( ) Ind. Coeff. Face value Stripped ( ) Maturity 18 1,743,57,985 FR164983 OAT 4.% 5 April 18 7,77,, FR11394345 OAT 1.% 5 May 18 18,191,, FR1137643 OAT i.5% 5 July 18 9,818,57,985 (1) 1.6451 9,3,5, FR167737 OAT 4.5% 5 October 18 7,57,, FR115357 OAT 1.% 5 November 18 19,93,,,, Maturity 19 138,55,,359 FR1311466 OAT.% 5 February 19 13,74,, FR189151 OAT 4.5% 5 April 19 3,198,, FR11788 OAT 1.% 5 May 19 17,43,, FR1853 OATi 1.3% 5 July 19 1,738,134,8 (1) 1.85 11,74,, FR5791 OAT 8.5% 5 October 19 8,844,39,893 5,533,585,1 FR1776161 OAT 3.75% 5 October 19 33,75,, FR11993179 OAT.5% 5 November 19,487,, 5,, FR57954 OAT cap. 9.8% 31 December 19 39,674,666 () 6,69,154 Maturity 176,136,,4 FR133485 OAT.% 5 February 7,59,, FR185418 OAT 3.5% 5 April 38,946,, FR1557957 OAT.% 5 May,969,, FR15559 OAT i.5% 5 July 5,368,,4 (1) 1.494,31,, FR1949651 OAT.5% 5 October 36,56,, FR1968337 OAT.5% 5 November 4,78,, Maturity 1 15,59,646,46 FR1331116 OAT.% 5 February 1 8,43,, FR131435 OAT i.1% 1 March 1 6,575,678,46 (1) 1.393 6,4,, FR119997 OAT 3.75% 5 April 1 39,35,, FR1315796 OAT.% 5 May 1 3,653,, FR1134746 OATi.1% 5 July 1 8,14,968, (1) 1.756 7,8,, FR115988 OAT 3.5% 5 October 1 39,891,, (1) face value x indexation coefficient (face value if coefficient < 1) () Including coupons capitalised at 31 December 17; not open to subscription 6
Negotiable government debt Medium- and long-term debt (maturing in and beyond) at 8 February 18 ISIN Code Bond Outstanding ( ) Ind. Coeff. Face value Stripped ( ) Maturity 13,6,584,43 FR57144 OAT 8.5% 5 April 1,43,939,99 58,888,4 FR11196856 OAT 3.% 5 April 44,359,, FR1319177 OAT.% 5 May 5,15,, FR1899765 OAT i 1.1% 5 July 19,97,644,44 (1) 1.1136 17,99,, FR1133788 OAT.5% 5 October 3,445,, Maturity 3 15,791,654,353 FR1383686 OAT.% 5 March 3 17,488,, FR57185 OAT 8.5% 5 April 3 1,66,195,93 5,371,565, FR1148667 OAT 1.75% 5 May 3 35,37,, FR158591 OATi.1% 5 July 3 17,54,458,45 (1) 1.11771 15,695,, FR1466938 OAT 4.5% 5 October 3 44,918,, 434,585, Maturity 4 86,946,661, FR11619436 OAT.5% 5 May 4 34,81,, FR1147848 OAT i.5% 5 July 4 16,11,661, (1) 1.398 15,494,, FR1196398 OAT 1.75% 5 November 4 36,6,, 51,, Maturity 5 1,58,63,88 FR155831 OATi.1% 1 March 5 9,95,695,17 (1) 1.1879 9,73,, FR15177 OAT.5% 5 May 5 34,7,, FR57115 OAT 6.% 5 October 5 9,593,98,118,848,64,4 FR1938116 OAT 1.% 5 November 5 8,37,, Maturity 6 93,55,, FR191694 OAT 3.5% 5 April 6 35,814,, FR13131877 OAT.5% 5 May 6 7,5,, FR13813 OAT.5% 5 November 6 3,14,, Maturity 7 88,7,7,46 FR13556 OAT 1.% 5 May 7 31,451,, FR11875 OAT i 1.85% 5 July 7 19,797,7,46 (1) 1.94 18,93,, FR11317783 OAT.75% 5 October 7 37,454,, 75,543,6 Maturity 8 4,748,85,7 FR133868 OATi.1% 1 March 8 5,39,68,95 (1) 1.179 4,955,, FR5716 OAT zero coupon 8 March 8 5,169,1 (3) 46,3,63 FR138619 OAT.75% 5 May 8 19,684,, Maturity 9 41,16,839,41 FR57118 OAT 5.5% 5 April 9 3,33,88,458 3,134,46,1 FR186413 OATi 3.4% 5 July 9 11,18,958,943 (1) 1.7419 8,734,144, Maturity 3 44,368,48,1 FR11883966 OAT.5% 5 May 3 33,8,, FR1198776 OAT i.7% 5 July 3 11,16,48,1 (1) 1.644 1,873,, Maturity 31 35,834,, FR199313 OAT 1.5% 5 May 31 35,834,, 93,, Maturity 3 45,557,957,65 FR188799 OAT i 3.15% 5 July 3 13,395,635,5 (1) 1.6553 1,585,, FR187635 OAT 5.75% 5 October 3 3,16,3,6 11,34,757,4 Maturity 33 and later 3,37,5,77 FR1331358 OAT 1.5% 5 Mai 34 3,31,, FR176 OAT 4.75% 5 April 35 6,678,, 4,935,437, FR1315444 OAT 1.5% 5 May 36 4,83,, FR137141 OAT 4.% 5 October 38 6,534,, 4,86,931,4 FR1334333 OAT 1.75% 5 June 39 9,697,, FR1447367 OAT i 1.8% 5 July 4 13,449,683,17 (1) 1.179 11,473,, FR177319 OAT 4.5% 5 April 41 3,78,, 7,46,999, FR1146137 OAT 3.5% 5 May 45 4,98,, 1,11,71, FR139871 OAT i.1% 5 July 47 7,417,837,6 (1) 1.16 7,61,, FR135754 OAT.% 5 May 48 17,18,, 666,, FR1171975 OAT 4.% 5 April 55 14,96,, 7,713,818, FR187956 OAT 4.% 5 April 6 13,55,, 6,99,54,1 FR131548 OAT 1.75% 5 May 66 9,17,, 37,1, (1) face value x indexation coefficient (face value if coefficient < 1) (3) Revised on 8 March 17; not open to subscription 7
1 3 4 5 6 7 8 9 1 11 1 13 14 15 16 17 The French economy and international comparisons Most recent economic indicators Industrial output, year-on-year 1.% Jan. 18 Household consumption*, year-on-year * manufactured products Sources: Insee, Minefi, Banque de France.6% Feb. 18 Unemployment rate (ILO) 8.9% Q4-17 Consumer prices, year-on-year all items 1.% Feb. 18 all items excluding tobacco 1.1% Feb. 18 Trade balance, fob-fob, sa ( bn) - 5.6bn Jan. 18 " " - 3.4bn Dec. 17 Current account balance, sa ( bn) - 1.6bn Jan. 18 " " -.8bn Dec. 17 1-year constant maturity rate (TEC1).71% 9 Mar. 18 3-month interest rate (Euribor) -.33% 9 Mar. 18 EUR / USD 1.3 9 Mar. 18 EUR / JPY 131.15 9 Mar. 18 Monthly government budget position General budget balance Source: Minefi 16 17 16 17 18-75.85-73.35-5.16-7.97-7.96 revenue 38.51 53.43 3.8.93 1.56 expenditure 314.36 36.78 8.5 8.9 9.5 Balance of special Treasury accounts General budget outturn end of January level 6.8 5.56-4..57 -.79-69.5-67.79-9.16-5.4-1.75 Public finances: deficit and debt As % of GDP 9. 8. 7. 6. 5. 4. 3.. 1.. 1.4 3. 4. 3.6 3.4.4.6 3.3 7. 6.9 5. 5. 4.1 3.9 3.6 3.4.6 1 96 9 88 84 8 76 7 68 64 6 56 5 48 deficit (left-hand scale) debt (right-hand scale) debt including impact of European guarantees Source: Insee (National accounts - base 14) General government debt in 16 As % of GDP 5. 5. 39.3. 175. 15. 15. 1. 75. 5. 88.3 96.5 68.1 13. 88.9 17.1 5.. Sources: Eurostat, IMF (National accounts - base 1) 8
The French economy and international comparisons French economic indicators: timetable April 18 May 18 6 Foreign trade by value in February 4 Industrial investments: April survey 6 Balance of payments in February 4 Foreign trade by value in March 1 Industrial production: February index 4 Balance of payments in March 1 Consumer prices: March index 9 Industrial production: March index 13 Net international reserves in March 15 Flash estimate of payroll employment: Q1 18 18 Inflation (HICP): March index 15 Consumer prices: April index 4 4 Monthly business survey (goods-producing industries) in April Quarterly business survey (goods-producing industries) in April 15 Net international reserves in April 16 Inflation (HICP): April index 5 Consumer confidence survey: April survey Job seekers Q1-18 (ILO) 7 Quarterly national accounts: initial estimate 18 Q1 Monthly business survey (goods-producing industries) in May 7 Industrial producer and import price: March indices Housing starts in April 7 Household consumption expenditure on goods in March Consumer confidence survey: May survey 3 Housing starts in March Quarterly national accounts: second estimate Q1 18 Household consumption expenditure on goods in April Industrial producer and import price: April indices Sources: Insee, Eurostat LinkedIn : https://www.linkedin.com/company/agencefrancetresor/ This publication, which is the exclusive property of AFT, is entirely protected by the provisions of the French Intellectual Property Code, particularly those provisions relating to copyright. Any reproduction of the content, in whole or in part, by any means whatsoever, without the permission of AFT, is strictly prohibited. As a result, the permission of the rights holder must be sought for any reproduction of the content exclusively for non-commercial purposes. Requests for permission must be submitted via e-mail to AFT's Publication Director at the following address: "contact@aft.gouv.fr". Reuse of information must mention the source and the date of the reproduction, and must feature the copyright notice " Agence France Trésor". English translation: Centre de traduction des ministères économiques et financiers 9