What is TEC 5?

A question asked privately:

We are negotiating a contract with a foreign counterparty. The draft contract currently under consideration contains a clause whereby the interest rate is computed using a formula based on Euribor and TEC5 benchmark rates. I understand Euribor, but what exactly is TEC5?

TEC 5 is yield to maturity of floating-rate five-year French government bonds. Since there are no such bonds currently outstanding, TEC 5 is calculated by interpolating the appropriate yield curve. The “official” TEC 5 is published by a French non-profit agency called Conseil de Normalisation Obligataire (Bond Standardization Council).

Agence France Trésor (the French Treasury) publishes only TEC 10 data, since there are 10-year floaters outstanding:

http://www.aft.gouv.fr/aft_en_21/deb…253/index.html
http://www.aft.gouv.fr/article_651.h…d_rubrique=253

Additionally, the source from which TEC 5 is to be determined for interest rate calculation should be specified in the contract, so don’t hesitate to ask the potential creditor where they plan to obtain TEC 5 data.

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