An attractive product in the shop window
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An attractive product in the shop window

"Why do car companies sell different models?" posits a banker. "They hope that by diversifying what they sell they'll capture a bigger audience and reduce their overall cost of funding." And so it is with the new French issue linked to the eurozone price index. "This is another product range in the shop window," he adds.

At the recommendation of the Agence France Trésor (AFT), the debt agency for the French finance ministry, the French government decided to issue a bond linked to the eurozone index (OATei). This is the first offering of its kind.

AFT CEO Sylvain de Forges says the government made this decision because he was told the time was ripe. As to why it decided to issue in such a low inflation environment, managing director Christophe Angely, in charge of the issue at Barclays, says it looked at the bond issue in July/August this year. "At that time the economic context was far different," he says. "Now, it's possible there is a recession in front of us. With a diverse range of potential investors, some will not want to buy it because they will think there is inflation ahead.

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