* New issue comes amid firm demand for inflation-linked debt
* Issue by syndication due as soon as Wednesday
* AFT aims to issue around 3 billion euros
(Adds AFT head quotes, background)
by Leigh Thomas and Raoul Sachs
PARIS, Feb 8 (Reuters) - France will issue a new 15-year OAT bond linked to euro zone inflation in the coming days, the debt management agency said on Tuesday, tapping growing investor demand for paper protected from inflation.
Globally, investor interest in bonds that track the rate of inflation has surged in recent weeks on concerns about the outlook for inflation.
"When you have higher growth you have higher inflation and so investors demand protection against potential upward revisions of inflation and so we have strong appetite for linker bonds which offer protection against that," Philippe Mills, Chief Executive of the debt management agency AFT, said.
Mills said the new OATei bond maturing July 25, 2027, could go on sale as early as Wednesday depending on market conditions and that the AFT was targeting an issue size of about 3 billion euros.
The euro zone's inflation rate hit 2.4 percent in January, the highest since October 2008, and investors expect it to stick at around 2.2 percent, according to the so-called breakeven rate that measures market expectations of euro zone inflation based on France's existing 10-year OATei bond. [ID:nLDE7091HX]
INFLATION PROTECTION PIONEER
France has been a pioneer of inflation-linked bonds in continental Europe for years, with a first issue in 1998. The liquidity of France's existing OAT bonds linked to euro zone inflation has made them a European benchmark.
Its new bond will be issued in a syndication led by Barclays
Capital
"The AFT's decision to now go ahead with that bond clearly underpins the very constructive market environment for linkers in general," Commerzbank interest rate strategist David Schnautz said.
France generally sells inflation-linked bonds to cover roughly 10 percent of its total annual debt issuance.
Last month, AFT issued nearly 3 billion euros of a new five-year BTANi bond linked to French inflation, the first five-year French linker, and attracted good demand from investors.
"We are an issuer that wants to have a complete curve on any segment of the market we are issuing in," Mills said. "For us it was obvious to have this specific point for the curve on euro area inflation."
The AFT issued 20.4 billion euros of inflation-indexed bonds last year out of a total gross issuance of BTAN and OAT bonds of 210.7 billion euros. (Reporting by Leigh Thomas; Editing by Susan Fenton)