The Government issued the first OAT indexed to the French consumer price index (OATi) on September 15, 1998. This was followed in October 2001 by the very first issue of an OAT indexed to the euro area consumer price index (OAT€i), the Harmonised Index of Consumer Prices (HICP).
Since then, AFT has issued inflation-indexed securities on a regular and transparent basis, thus creating two curves, one indexed to French inflation and the other to euro area inflation. Around 10% of AFT’s annual issuance programme comprises these securities, and this percentage may be even higher if there is sufficient demand (12% in 2008, 7.5% in 2009, 10.8% in 2010, 10.9% in 2011, 9.6% in 2012, 9.9% in 2013, and 10.2% in 2014). Since 2004, OATi and OAT€i auctions are held on a regular basis on the same day as auctions for medium-term OATs, but during a separate session (11.50am). OATi and OAT€i are designed for all types of investors looking to protect the purchasing power of their investments, improve their asset-liability management or diversify their investment portfolio. They are suitable for resident or nonresident institutional investors, e.g. insurance companies, pension and social welfare funds, asset managers, banks, etc, as well as private individuals.
OATi GENERAL CHARACTERISTICS
They have a par value of €1 and the real coupon is calculated as a fixed percentage of the index-linked principal. It is established at the time of issue and remains fixed to maturity. The coupon is paid annually and calculated as follows: real coupon x par value x indexation coefficient. The indexation coefficient is equal to the daily inflation benchmark J divided by the basic benchmark. The daily benchmark is calculated on a linear basis between the CPI for the month M-3 and the CPI for the month M-2, and the basic benchmark is the daily benchmark used as the basis for calculating changes in the price index. The benchmark index is the CPI, the consumer price index excluding tobacco for all French households published every month by INSEE.
AFT calculates and publishes the daily inflation benchmarks and indexation coefficients on its website.
OAT redemption is based on the following formula: par value x indexation coefficient. If the daily inflation benchmark at maturity is lower than the basic benchmark, redemption at par is guaranteed.
|General characteristics of OATi|
|Real coupon||Fixed percentage of linked principal, determined on issue and fixed until maturity.|
|Paid coupon||Post-set annual coupon calculated according to the following formula: real coupon x nominal x indexation coefficient.|
|Reference index||Consumer price index (CPI) excluding tobacco for all households residing in mainland France, published every month by the INSEE.|
|Daily inflation reference||Daily reference calculated by linear interpolation according to the following formula:|
• the reference applicable to the first day of the month m is the CPI for month m-3. For example, the reference applicable to June 1 is the CPI for March.
•the reference for any other day of month m is calculated by linear interpolation between the CPI for month m-3 and the CPI for month m-2, according to the following formula.
|The daily inflation references, including the base index, are rounded to the nearest fifth decimal after truncating up to the sixth decimal. The same rule applies to the indexation coefficient.|
|Basic reference||Daily reference used to calculate the change in the price index.|
|Indexation coefficient||CIj = reference of day j / basic reference.Same rounding rule as for the daily inflation reference.|
|Publication procedure||The Ministry of the Economy, Finance and Industry calculates and publishes the daily inflation reference and the indexation coefficient through the web site www.aft.gouv.fr and through the major real-time financial information services (Reuters <TRESOR> and Bloomberg TRESOR <GO> pages).|
|Indexation method||All flows, accrued interest, aggregate interest and principal are paid according to the indexation coefficient.|
|Redemption on maturity||Nominal x indexation coefficient. Should the daily inflation reference on maturity be lower than the basic reference, redemption at par is guaranteed.|
|Accrued interest||Real coupon x (number of days passed / exact number of days of the interest period) x nominal x indexation coefficient.|