French Budget Bill 2024
2024
1. This morning, the French Budget Bill for 2024 was presented to the Council of Ministers. The total financing requirement will stand at €299.7bn, down €10.6bn compared to the 2023 updated financing requirement, mainly consisting of (i) €144.5bn to cover the deficit to be financed, down €27.6bn compared to the updated 2023 deficit, and (ii) €160.2bn to redeem medium- and long-term debt maturing in 2024, up €10.6bn compared to 2023.
2. The financing requirement in 2024 will be met by (i) the medium- and long-term government debt issuance programme, net of buybacks, worth €285bn, (ii) an increase in outstanding short-term government securities (BTFs) for €7.7bn, (iii) €6.5bn of Covid debt redemption from the Caisse de la dette publique (iv) and other cash resources of €0.5bn.
3. State debt service is expected to stand at €52.2bn.
4. The net year-on-year increase in the nominal value of negotiable State debt with maturities of one year or more will be capped at €129.5bn.
5. The detailed medium- and long-term financing programme for 2024 will be released in December 2023.
2023
6. Since the beginning of 2023, the weighted average yield of medium- and long-term debt securities issued stands at 2.95%, compared to 1.43% in 2022, an average of 1.16% from 2009 to 2021, and yields of 4.15% from 1998 to 2008.
7. The deficit to be financed in 2023 has been revised upwards to €172.1 bn, compared to the amount of €164.9bn provided for in the 2023 initial Budget Act (LFI) promulgated in December 2022.
8. “Other cash resources” are projected at -€13.9bn, as a result of discounts at issuance, compared to +€0.5bn in the 2023 LFI.
9. The drawdown of the Treasury’s account stands at €27.6bn, against €24.5bn in the 2023 LFI.
10. Outstanding BTFs will increase by +€20bn, against +€3.3bn in the 2023 LFI.
11. For 2023, issuance of medium- and long-term debt, net of buybacks, will remain flat at €270.0bn.
12. State debt service is expected to stand at €55.5bn, versus €51.7bn in the 2023 LFI, mainly as a result of the rise in short-term interest rates.
State financing programme for 2024
On 13th December 2023, on the basis of the 2024 Budget Bill, which provides for medium- and long-term borrowing (OATs) of €285.0bn, net of buybacks, Bruno Le Maire, Minister for the Economy, Finance, Industrial and Digital Sovereignty, has approved the indicative State financing programme for 2024.
In 2024, the State's forecast financing requirement will stand at €295.8bn, mainly due to a budget deficit of €144.4bn and €156.4bn of medium- and long-term debt maturing in 2024. This financing requirement will mainly be covered by medium- and long-term borrowing (OATs) of €285.0bn net of buybacks and a €3.8bn variation in short-term debt (BTFs) outstanding.
As in previous years, Agence France Trésor (AFT) will adjust its debt issuance programme to meet demand and guarantee a liquid market for its securities. The programme also stipulates that bonds linked to French and European inflation indices will account for approximately 10% of net medium- and long-term debt issuance.
In addition, AFT may buy back debt in 2024 (BTFs and nominal and inflation-linked OATs) depending on market conditions.
1. Creation of new securities
In the nominal bond segment:
- AFT will issue one new 3-year benchmark, one new 5/6-year benchmark and one new 10-year benchmarks via auction.
- AFT will examine, together with the primary dealers, the prospect of a syndicated issue of a new long term green bond in the continuity of the previous green OATs, depending on market conditions.
- AFT will also examine, together with the primary dealers, the prospect of a syndicated issue of a new 30-year benchmark, depending on market conditions.
In the inflation-linked bond segment:
AFT will consider, depending on market demand, the opportunity of issuing by syndication a 20-year European inflation-linked bond (OAT€i).
More generally:
AFT will keep tapping all of the existing nominal and European and French inflation-linked bonds, depending on demand for them.
AFT will also keep tapping its green bonds according to market demand. All of these issues will be carried out within the limit of eligible green expenditures for 2024, the amount of which will be communicated next January.
Finally, as mentioned in the 2021 State financing programme of 9 December 2020, a repo facility could be created, to be managed by the Caisse de la dette publique (CDP). This tool would allow, to mobilise cash up to €20bn through short term repurchase agreements. Be it created, this facility would be announced through a dedicated press release.
2. Methods and timing of auctions
Depending on market conditions and after consultation with primary dealers, an auction of nominal OATs and/or an auction of linked OATs may take place on the first Thursday of December. During the other months, OATs with maturities of more than 8.5 years will be auctioned on the first Thursday of the month and OATs with a maturity of 2 to 8.5 years and inflation-linked OATs will be auctioned on the third Thursday of each month.
Auctions of nominal bonds will be held at 10.50am (Paris time), and auctions of inflation-linked bonds at 11.50am (Paris time). BTFs will be auctioned every Monday at 2.50pm (Paris time).
AFT will inform the market of any changes to the auction schedule.
Regarding the securities to be auctioned, as in previous years, AFT reserves the right to adapt its issuances by tapping non-benchmark issues in response to demand from investors as estimated by the primary dealers.
3. New collective action clauses in new bonds
Effective the first day of the second month following the ratification by all parties of the Agreement Amending the European Stability Mechanism Treaty, new State-issued bonds will include “single-limb” collective action clauses.
For newly created nominal OATs with maturities of 2 years or more, redemption dates will be changed to dates in March or September. For inflation-linked OATs, redemption dates will remain in March and July.
4. Managing average debt maturity
The implementation of the reduction of the average maturity of the debt initiated in 2001 remains suspended. The interest rate swap programme will be reactivated if market conditions warrant.
5. 2023 financing programme status report
The gross nominal value of medium- and long-term debt issuance in 2023 stood at €303.1bn, consisting of €278.6bn in fixed-rate bonds and €24.5bn in inflation-linked bonds.
In 2023, AFT bought back €17.5bn of debt maturing in 2024 and €15.6bn in debt maturing in 2025.