In a 2017 market environment where the ECB sustains quantitative easing throughout the year, Agence France Trésor will continue to adapt its issuance policy to market developments. AFT will continue its policy of adjusting issuance to investor demand during the year to maintain the greatest liquidity possible in every segment of the yield curve.
The year 2017 is already promising to be a year of innovation, with the issue of a French government green bond, as announced jointly by Ségolène Royal (Minister for the Environment) and Michel Sapin (Minister for the Economy and Finance) in September 2016. When market conditions permit, AFT will undertake the syndicated launch of the long-dated green OAT to serve as a benchmark bond (see box).
In keeping with market demand, AFT will also issue a new benchmark bond maturing in February 2020 to serve as a 2-year long-dated benchmark bond. Investors welcomed the launch of an equivalent bond in 2016 that made it possible to meet demand in the context of negative short-term yields. AFT will also issue one or two new 5-year benchmarks and two new 10-year benchmarks. In collaboration with primary dealers, AFT will also examine the prospects for a new syndicated issue of a 30-year bond, depending on market conditions.
The funding programme calls for issuance of bonds linked to French and European inflation indices. As in previous years, such bonds will account for “approximately 10% of net medium- and long-term debt issuance”. AFT will issue a new 10-year benchmark bond linked to French inflation (OATi). Unless very strong demand arises in 2017, issuance of a new 10-year benchmark bond linked to European inflation (OAT€i) will take place in 2018.
All the new benchmark bonds will continue to be tapped so that outstanding amounts are sufficient to ensure a liquid market.
AFT will innovate with the launch of the first “green OAT” in 2017
The green OAT, which is now being planned, constitutes an eagerly-awaited innovation. As 2016 draws to a close, Agence France Trésor continues to prepare plans for the new product in close collaboration with the Ministry of the Environment, defining a pool of eligible green projects and expenditures to be funded that relate to energy transition, ecology, the climate and the environment. The green OAT will be designed to fit into the French yield curve and, as such, it will enjoy the same liquidity as other OATs. In this respect, the creation of this new bond will be consistent with AFT’s issuance strategy, with the goal of achieving benchmark status for the inaugural issue to ensure a liquid market. Like conventional OATs, the green OAT could then be tapped repeatedly to meet investor demand, thus maintaining a high level of liquidity on the secondary market.
