September 27, 2019 / 10:28 AM / 20 days ago

UPDATE 1-France to raise bond issuance in 2020 on higher redemptions

(Adds details on rates, debt servicing)

By Leigh Thomas and Myriam Rivet

PARIS, Sept 27 (Reuters) - France will raise the amount of bonds it issues next year compared to this year as higher redemptions offset a smaller deficit, the public debt management agency said on Friday.

The Agence France Tresor said it planned to issue 205.0 billion euros ($224 billion) of medium and long-term bonds next year, net of buybacks, up from 200.0 billion this year.

France would benefit from a smaller state deficit next year, with the government expecting a budget shortfall of 93.1 billion euros after 96.3 billion euros this year.

But more debt would be issued because of a higher level of debt coming due that would need to be refinanced. Redemptions are expected to reach 136.4 billion next year compared to 130.2 billion this year.

On top of that, there would also be 1.8 billion euros of debt from the state railway firm SNCF that would be redeemed, after the government agreed to carry its debt on its books.

The AFT said it aimed to increase the amount of Treasury bills outstanding by 10 billion euros to help absorb the higher funding requirement. A further 2 billion would come from funds earmarked for lowering debt as well as other resources.

France has been benefiting from record low borrowing costs in recent months as bond yields have dropped internationally in the face of deteriorating global growth prospects and expectations of more central bank monetary stimulus measures.

The 2020 draft budget, which the government presented on Thursday, foresees favourable interest rate conditions persisting next year, although not to the same extent as recent lows.

After hitting a record low of -0.4% in mid August, the yield on France’s benchmark 10-year bond would stand at 0.2% at the end of this year and 0.7% in 2020, according to forecasts in the budget.

As a result, the AFT estimated that debt servicing costs would burden the budget by 38.6 billion euros next year, down from 40.4 billion euros.

$1 = 0.9153 euros Reporting by Leigh Thomas and Myriam Rivet; Editing by Sudip Kar-Gupta

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