Agence France Trésor

1. Agence France Trésor Sébastien BOITREAUD, Deputy Chief Executive, AgenceFrance Trésor Europlace Stockholm – 29 March 2007

2. AFT Funding Strategy • Focus on Inflation-linked Bonds

3. 2007 Funding Requirement and Sources

4. AFT Mandate and Strategy • Agence France Trésor manages central government debt and cash under the most secure conditions in the best interest of the taxpayer. • In order to minimise debt costs over time, AFT sets priority to stability and predictability. AFT does not aim at beating the market through opportunistic transactions. • AFT seeks the highest liquidity standard, is committed to transparency, and aims at relevance and innovation in the management of the French Republic debt.

5. OATs and BTANs Outstanding as of 28 February,2007

6. Sustained Interest from Non-French Investors Round 24.2% of non euro holdings, end of 2004, CPIS IMF Source: Banque de France

7. AFT Funding Strategy • Focus on Inflation-linked Bonds

8. A Structural Demand Index-linked bonds provide: • Ability to invest on a real-yield basis • Diversificationfor portfolio managers • Improved efficient frontier • Good performance record • Better asset and liability matching • Evolution of regulatory and accounting framework will increase demand • Market expectations of future inflation, through inflation break-evens • Valuable indicators for central banks

9. Optimizing the State’s Balance Sheet Asset-liability management: Revenues are correlated with inflation, directly or indirectly Budget smoothing: Inflation is negatively correlated with fiscal deficits Diversification of the State’s liability portfolio Meeting Strong Demand And diversifying the investor base Providing a Public Good Expanding the hedging opportunities of private agents Providing policymakers with a market measure of expected inflation Is it Cost-Efficient? In an efficient market, inflation is fairly priced and nominal and real bonds are equivalent Additionally, the inflation-risk premium is eliminated Why Issue Inflation-Linked Bonds?  Theoretical studies to support these assertions (see next page)

10. A Risk Management Framework for Government Debt Strategies: Results • with cost measure = average debt cost : classic cost-risk curve, i.e. issuance of ILBs decreases cost but increases volatility of debt interest cost • with cost measure = average fiscal balance : U-shaped cost-risk curve, i.e. there exists an optimum in inflation share of the debt portfolio. Depending on parameters, optimum varies between 10% and 20%.

11. Building the Real Curve • 1998: 10yr French Linker OATi 2009First ever euro-denominated linker • 1999: 30yr French Linker OATi 2029 • 2001: 10yr Euro Linker OAT€i 2012First euro-zone linker • 2002: 30yr Euro Linker OAT€i 2032 • 2003: 10yr French Linker OATi 2013 • 2004: 15yr Euro Linker OAT€i 2020 7yr French Linker OATi 201110yr Euro Linker OAT€i 2015 • 2005: 10yr French Linker OATi 2017 • 2006: 5yr Euro Linker BTAN€i 2010 • 2007: 30yr Euro Linker OAT€i 2040 • N.B. 2003: 22yr Greek linker, 5yr Italian linker 2004: 10yr, 30yr Italian linkers 2006: 10yr German linker

12. Key Figures for French Index-Linked Bonds Face value as of 23 March 2007: • French Inflation (OATi): €56.4bn • OATi 3% 2009: €13.8bn • OATi 1.6% 2011: €11.0bn • OATi 2.5% 2013: €13.9bn • OATi 1% 2017: €11.2bn • OATi 3.4% 2029: €6.4bn • Euro Area Inflation (OAT€i): €54.0bn • BTAN€i 1.25% 2010: €5.8bn • OAT€i 3% 2012: €14.5bn • OAT€i 1.6% 2015: €10.0bn • OAT€i 2.25% 2020: €11.0bn • OAT€i 3.15% 2032: €8.7bn • OAT€I 1.80% 2040: €4.0bn Total (inflated) as of 28 February 2007: €114bn • 12.6% of Total Marketable Debt • 13.6% of Medium- and Long-Term Debt (OATs and BTANs)

13. AFT Commitments Regarding ILBs • Regularity: Monthly issuance since 2004 (excluding August and December) • Predictability: ILB auction on 3rd Thursday of the month, 11:50 am, Paris time • Relevance: AFT is committed to issuing at least 10% of its financing program in linkers and significantly more if justified by demand (17.5% in 2006) • Ensuring liquidity through primary issuance and through primary dealers’ market making • Building two real curves: French & European inflation, and ensuring their liquidity

14. A Sustained Demand … Volumes Bid and Served at OATi/€i Auctions €bn

15. … for bothOATis andOAT€is Volumes issued €m

16. Foreign Holdings of OATi and OAT€i Source: Banque de France

17. Turnover on ILBs: OATi & OAT€i Source AFT, based on monthly reporting by primary dealers Total Turnover (buy+sell) 2004 – 2005 2004 2005 Net buyer over 2004 - 2005 Net seller over 2004 – 2005

18. Strong Liquidity in Index-linked Government Bonds Market Turnover in French Government Inflation-Linked Bonds (in € bn per month) OATei-15 OATi-17 BTANei-10 OATi-11 OATei-20 OATi-13 OATei-32 OATei-12 OATi-29 Source: AFT

19. 18% 16% 14% 12% 10% 8% Total 6% 4% 2% 0% 1998 1999 2000 2001 2001 2002 2003 2004 Comparable Turnover in TIPS and French ILBs Trading Turnover of French Government Inflation-Linked Bonds Weekly Trading Volume Relative to Outstanding Debt Source: NY Fed Source: AFT 2005: Monthly average trading volume relative to outstanding debt: Total debt: 37,3% Inflation-linked bonds: 49,03%

20. www.aft.gouv.frReuters: <TRESOR>Bloomberg: TRESOR <GO> More Information on…

21. Stockholm, Thursday, March 29, 2007 Paris, Gateway to Euro Capital Markets