Gov't firms up plans for domestic bond swap

Posted at 05/19/2012 9:02 AM | Updated as of 05/19/2012 10:08 PM

MANILA, Philippines - The government is firming up plans for a planned domestic bond swap this year, a senior Finance official said.

Finance Undersecretary Rosalia de Leon said the government is finalizing the plans for the debt swap including the timing of the transaction and the volume.

“We are still looking at our options,” she said.

What’s clear is that the government is still planning to do a swap this year, De Leon said.

The government may do it in the second half of the year, officials said.

National Treasurer Roberto Tan also said nothing is final yet.

While nothing is final yet, officials said a domestic bond exchange is among the options considered by the government for its debt liability management.

Treasury officials said the debt swap has been an effective tool and that it’s been gaining a lot of benefits for the government.

Tan has said the idea is to make the debt swap a regular offering by the government.

Aside from debt swaps wherein huge volumes are exchanged, Tan said the Bureau of the Treasury is also eyeing to do smaller transactions, which may be part of the regular Treasury bond auction.

It can be a bond switch instead of the wholesale bond exchange, Tan explained.

The government currently has P2.9 trillion in outstanding debt, some of which are illiquid bonds or those that trade a lot less frequently than other bonds.

The last time the government did a domestic bond exchange was in July 2011 wherein investors offered to swap P323.5 billion worth of bonds for debt maturing in 2022 and 2031. Total accepted tenders amounted to P292.5 billion.

The average government debt maturity lengthened to 10.18 years in 2011 as a result of the government’s debt liability management efforts.

The latest debt maturity profile is an improvement from the 8.8 years recorded in 2010 and the longest average maturity achieved since at least 2001, data from the Finance department showed.

Specifically, the average maturity of domestic debt stretched to 9.21 years as of last year from 6.7 years while the average maturity of foreign obligations extended to 11.36 years from 11.34 years.