FRENCH PRIMARY BOND MARKET SHOWS NEW SPARKLE The French primary bond market is showing signs of renewed effervescence after several weeks of lethargy and the trend is expected to continue if hopes of imminent interest rate cuts are fulfilled, market operators said. The Bank of France is generally expected to give a signal to the market, possibly at the beginning of next week, by announcing a quarter point cut in its intervention rate, which has stood at eight pct since January 2, or in its seven-day repurchase rate, set at 8-3/4 pct since January 5. The central bank's averaged-out day to day call money rate, the reference rate for interbank money market operators, which reached 8-3/4 pct on February 18 has fallen to 7-3/4 pct this week, dealers noted. The Bank of France's "open market" policy to regulate the money markets since December has been based on a floor and ceiling of rates within the limits of its intervention and seven day repurchase rates. For the moment the sentiment is of "wait and see" on rate cuts, but there are now more optimists than pessimists among market operators, a dealer for a major French bank said. Dealers said there is abundant liquidity on the bond market, noting that this week's monthly Treasury tap issue of 11.87 billion francs had a good reception and was fairly easily absorbed. The Treasury had set an upper limit on the issue of 12 billion francs and was likely to continue to try and sell as much paper as it could over coming months to meet its borrowing needs for this year of around 150 billion, one banker said. Dealers said there was no difficulty in placing liquidity in the primary market at the moment despite competition from the surge in investments on the Paris stock exchange. There has been a flood of large bond issues, but with formulas well adapted to market conditions and investor demand - with warrants or a mix of fixed and floating-rates - which have been snapped up, and with generally broadly negative fees. Dealers pointed to the recent Caisse d'Aide a l'Equipement des Collectivites Locales (CAECL) 8.90 pct two billion franc bond with warrants exchangeable for floating-rate bonds issued over 13 years and 80 days at 97.04 pct with payment date March 9, which was today quoted at -0.90 to -1.10 pct. Even classic fixed-rate issues, after being neglected since the end of last year, are finding buyers, one banker said. Dealers said that now the question was to see how the terms of imminent operations would be set, with great market interest focussed on the likely three next issues. These will include an expected four to five billion franc issue for Electricite de France, to be followed by a bond of around one billion francs for Auxiliaire du Credit Foncier, a subsidiary of the banking group Credit Foncier de France, and a new issue by tender from the mortgage agency Caisse de Refinancement Hypothecaire.