The latest annual report from Agence France Trésor shows that France once again benefited from exceptional debt financing conditions in 2021, with a weighted average rate on medium and long-term debt issues negative for the second time by its history: -0.05% compared to -0.13% in 2020. This rate was close to 0 in 2019 (0.11%) while it averaged 1.52% between 2009 and 2018 and at 4.15% over the period 1998-2008.
Sharp rise in the average rate in 2022
With the acceleration of inflation and the normalization of monetary policies, this rate will rise sharply this year while the yield on 10-year OATs is currently around 1.5% after a peak of 2.35% in mid -June. As manager of the State’s treasury, Agence France Trésor aims to raise from the markets the funds needed to finance France under the best possible security conditions, while striving to minimize the burden of debt for the taxpayer.
Medium and long-term treasury-like bond (OAT) issues amounted to €260 billion in 2021. At the same time, the State’s financing requirement finally stood at €285.2 billion. last year, down 24.3 billion euros from the 2020 level but remained at a high level due to continued public support for the economy in the face of epidemic waves. This financing requirement is mainly determined by the public deficit to be financed and by debt interest (amortization of medium and long-term government securities).
More than 2.100 billion euros of debt
State debt exceeded 2,100 billion euros at the end of 2021, still up by 136.3 billion over one year. An amount held by French investors up to 52.2% as of December 31, 2021 and by non-resident investors up to 47.8%, a significant part of which is located within the euro zone. The investors are central banks, sovereign wealth funds, asset managers, banks, pension funds or even insurance companies that participate in issues to supply the funds in euros for life insurance contracts. Individuals are therefore also indirect investors. 7.8% of France’s debt was renewed in 2021.
to know
Faced with investor demand for securities with longer maturities with more attractive yields, Agence France Trésor notably launched last year by syndication a new security with a maturity of 30 years, the OAT 25 mai 2053, with a coupon of 0, 75%.
About 200 end investors subscribed to the operation which was finally issued at a rate of return of 0.918%. Issues of securities give rise to the collection of premiums or discounts on issue when there is a difference between the rate attached to the security (coupon rate) and the rate demanded by the market on issue.