Posted on September 26, 2022 at 13:52Updated on September 26, 2022 at 14:12
This is a new historical record. France plans to capture 270,000 million euros in the medium and long term in the markets in 2023. They are 10,000 million more than in the previous two years. Bercy will appear again this year among the main borrowers of the euro, a priori only behind Italy, and ahead of Germany. Short-term public securities in circulation (less than 2 years) should increase by 10.4 billion euros.
This unprecedented financing program will take place in a rather difficult context, between inflation, rate hikes and the end of central bank purchases. While the Agence France Trésor (AFT), in charge of placing France’s debt on the markets, still benefited at the end of 2021 from a 10-year negative rate – it earned money by borrowing – the latter was close to 2.7% in the early hours of Monday afternoon.
A debt charge of 51.7 billion
In its budget scenario, the AFT expects a 10-year return of 2.5% at the end of December and 2.6% at the end of 2023. A hypothesis that seems optimistic, but that bets on a slowdown in inflation next year. In terms of the global cost of debt, the effects of this increase in financing conditions will take time to be felt. The average maturity of the 2,200 million French debt is slightly over 8 years, which makes it possible to delay the impact.
The debt burden (in national accounts) should fall from €51.2bn in 2022 to €51.7bn next year. But if there were a 1 percentage point interest rate shock – if the yield on 10-year bonds fell from 2.5% to 3.5% – the additional cost to public finances would be $2.4bn. euros in 2023, 6,000 million in 2024 and 9,000 million billion in 2025.
At Bercy we also insist that the weight of this medium and long-term debt issuance program on the economy will remain stable, at 9.8% of GDP, as in 2022. A proportion that remains the highest in the last 20 years, out of Covid support.
Increase in refunds
The increase in financing needs is mainly due to amortizations of existing debt, which are progressing. The deficit to be financed is slightly reduced compared to this year, going from 172,600 million euros in 2022 to 158,500 million in 2023.
As for the maturities to be refinanced of medium and long-term debt, on the contrary, their amount will increase by 10,800 million, up to 158,500 million. This movement is explained because in 2023 a 15-year bond and another 30-year bond will mature.
And if this year Bercy had been able to make use of the treasury reserved by the State in previous years to be able to respond, for example, to a new episode of confinement, in 2023 this will no longer be the case. The contribution of the Treasury balance will be reduced to 18,000 million euros next year, compared to 49,800 million in 2022.