Agence France Trésor expects to issue €260 billion in medium- and long-term debt next year, as in 2021. The anticipated decline in the budget deficit, as the health crisis is overcome, is offset by the increase in debt amortization. Moody's commented on the presentation of the 2022 Finance Bill and France's "rating trajectory" which will depend, in part, on its ability to reduce the increase in deficit and debt.
On the occasion of the presentation of the 2022 Finance Bill (PLF) to the Council of Ministers, Agence France Trésor (AFT) communicated on Wednesday the State's financing needs, as well as the rate scenarios retained for next year.
260 billion in 2022, an amount exactly equal to that planned for 2021. The reduction in the budget deficit, due to the post-crisis economic rebound, will be offset by the increase in the amount of debt maturing. The details of the issuance programme will be unveiled in December.
292.7 billion in financing requirements
"The State's forecast financing requirement will reach 292.7 billion euros, mainly due to a budget deficit of 143.4 billion euros (compared with 197.6 in 2021) and 149.8 billion euros (compared with 118.3 in 2021) of medium- and long-term debt repayment maturing in 2022. The partial assumption of SNCF Réseau's debt will also add 3.1 billion euros of debt amortisation to be financed by the State in 2022", explains Agence France Trésor.
(Source: PLF 2022)
"The borrowing requirement in 2022 will be covered by (i) the medium- and long-term government securities issuance programme in the amount of €260.0 billion net of buybacks (ii) €22.3 billion contribution from the balance of the Treasury account (iii) €5.0 billion increase in the outstanding amount of short-term government securities (BTF) (iv) €1,9 billion in debt amortization covid by the Caisse de la dette publique (v) other cash resources for an amount of 3.5 billion euros based on an assumption of premiums net of issue discounts for an amount of 3.0 billion euros", the debt agency details.
Massive purchases by the Banque de France
The Finance Bill assumes a significant increase in long-term interest rates by the end of 2022, due to the normalisation of the ECB's (European Central Bank) monetary policy.
The yield forecast is 0.75% for 10-year bonds at the end of 2022 and 0.3 % by the end of the year, compared with 0% today. The scenario for short-term rates is based on the assumption of stability.
(Source: AFT, PLF 2022)
In 2021, the average rate for 10-year issues is -0.04%, compared with -0.12% in 2020 and +0.23% in 2019.
Massive purchases by the Banque de France, which implements the ECB's monetary policy, are currently absorbing a large proportion of new issues, against a backdrop of rising financing requirements and low yields. The national central bank currently holds about one-fifth of French public debt.
As a result of the central bank's active participation in Treasury issues, non-residents held less than 50% of France's negotiable public debt for the first time since 2004.
Sarah Carlson, analyst at Moody's Investors Service, in charge of France's rating, reacted to the presentation of the Finance Bill:
"The 2022 Finance Bill presented today highlights the difficult balance for the government between maintaining support for the economic recovery and containing public spending. The trajectory of the French government's rating will depend, in part, on its ability to reduce the increase in deficit and debt caused by the pandemic."
On 31 August, the rating agency maintained France's Aa2 rating with a stable outlook. It expects debt to reach 114.2 % of GDP in 2022, up from 115.6 % in 2021 and 95.6% in 2015.
(Source: Agence France Trésor)
Now under the direction of Cyril Rousseau, AFT is currently launching a new selection process for Treasury securities specialists for a new mandate of three years, from 2022 to 2024.