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France: tracking inflation out to 30 years

Sovereign borrowers

France surprises with innovative long maturity
bond issue

One of the most impressive sovereign deals of 2002 was France's e4 billion 30-year bond indexed to eurozone-wide inflation. Although France, like many other issuers, has long experience in issuing domestic inflation bonds, this was only its second eurozone CPI-linked deal. The first, in 2001, was also well received, but at 10 years this was an easier achievement. France's success in selling such an innovative structure at such a long maturity surprised many in the market, particularly in the light of a projected 15% increase in government debt supply in 2003 over last year's levels. Several sovereigns may try to emulate it this year - among others Italy and Germany have expressed an interest in doing so.

John Winter, European head of investment banking and debt capital markets at Barclays Capital, says: "This was a stunning deal. The Trésor team worked very hard to market an innovative product that sceptics thought would find little demand and, at 30 years, a maturity that few thought would be achievable."

Sylvain de Forges, chief executive of the Agency France Trésor, had been planning a longer deal for some time following the success of the first one.

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