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MACRO ANALYSIS: Foreign Holders Have Been Key To Absorbing OAT QT (1/2)

MACRO ANALYSIS
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The attached analysis piece sketches out key compositional changes in French debt from 2004 to Q2 2024, using data from the IMF (Arslanalp and Tsuda, 2014, updated) and the ECB.

  • Foreign holders have been key to absorbing increased OAT free float since 2022 stemming from the ECB’s balance sheet run-off.
  • As of Q2 2024, non-official foreign investors hold 33% of outstanding French general government debt. Meanwhile, 19% of French debt is held by “Foreign official” investors (which include non-domestic central bank FX reserves, bond holdings at non-domestic Eurosystem banks and foreign official loans).
  • As ECB holdings have fallen from 28% to 24% of outstanding debt between 2022 and Q2 2024, foreign bank holdings have increased from 4% to 7%, and non-bank holdings have increased from 23% to 26%. Domestic bank/nonbank holdings have fallen 1pp each.
  • Indeed, ECB Executive Board member Schnabel highlighted on November 7 that “foreign investors have been absorbing the largest share of the net issuance of bonds in the euro area since the Eurosystem ended its reinvestment of securities under the asset purchase programme (APP)”.
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The attached analysis piece sketches out key compositional changes in French debt from 2004 to Q2 2024, using data from the IMF (Arslanalp and Tsuda, 2014, updated) and the ECB.

  • Foreign holders have been key to absorbing increased OAT free float since 2022 stemming from the ECB’s balance sheet run-off.
  • As of Q2 2024, non-official foreign investors hold 33% of outstanding French general government debt. Meanwhile, 19% of French debt is held by “Foreign official” investors (which include non-domestic central bank FX reserves, bond holdings at non-domestic Eurosystem banks and foreign official loans).
  • As ECB holdings have fallen from 28% to 24% of outstanding debt between 2022 and Q2 2024, foreign bank holdings have increased from 4% to 7%, and non-bank holdings have increased from 23% to 26%. Domestic bank/nonbank holdings have fallen 1pp each.
  • Indeed, ECB Executive Board member Schnabel highlighted on November 7 that “foreign investors have been absorbing the largest share of the net issuance of bonds in the euro area since the Eurosystem ended its reinvestment of securities under the asset purchase programme (APP)”.