Government eyes domestic swap this year

MANILA, Philippines - The government is eyeing to do a domestic bond swap this year after having successfully lengthened its debt maturity profile last year, National Treasurer Roberto Tan said.

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

“Hopefully, we will have one this year. It’s been an effective tool and it’s been gaining a lot of benefits for us,” Tan said.

He said the idea is to make the debt swap a regular offering by 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.

“Through the bond switch, investors can bid for illiquid bonds and exchange this with benchmark bonds,” he said.

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 DOF 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.