###POV. FRENCH LIFE INSURANCE FLOWS MAY.........>

OAT: ###POV. FRENCH LIFE INSURANCE FLOWS MAY RECOVER

- French life insurers of the drivers of the 10-20Y section of French OAT demand

and are the largest domestic investor in the OAT market. But it has not been a

good time for net inflows into insurance products. 

- The French Insurance Federation reported that November saw a E0.5bln monthly

net outflow, the biggest net outflow since a similar decline in September 2016.

Overall, French life insurance inflows have been lacklustre for almost the

entirety of 2017, with just ~E7bln of net inflows for the entire year-to-Nov.

- Life insurers compete strongly for cash with Livret A accounts and but the BdF

held this rate held steady in August last year at 0.75% when it should have

risen to 1% rate - flows into life insurance picked up somewhat. In December, it

was announced that the Livret A rate will remain fixed at 0.75% until end

January 2020. 

- Flows into life insurance can be proxied by looking at the difference between

OAT yields and the Livret A rate. In a bearish OAT market, this will create a

natural vane of demand for OATs as the spread difference builds.