Government will continue doing debt swaps

MANILA, Philippines - The Aquino administration will continue to do debt swaps next year as part of the government’s debt liability management efforts, Finance Secretary Cesar Purisima said yesterday.

In a presentation at the House of Representatives for the 2013 national budget, Purisima said that for next year, the government would continue to do debt swaps to lengthen maturities and consolidate outstanding debt.

“We will continue doing debt exchanges. If the market opportunity is there we will continue to do transactions that will help us accomplish our targets,” Purisima said.

He said the government may do swaps for both domestic and foreign bonds.

The government is also open to issuing global peso notes for a debt liability transaction, he said.

“When the market opportunity offers us to issue a GPN in a debt management transaction, we will consider to do so,” he said.

He said this would be in line with the goal to reduce the foreign currency component of the government’s debt.

For this year, the government is eyeing to do a domestic debt exchange by swapping outstanding shorter-dated debt in the market with longer-dated papers.

“The plan is to issue seven, 10, 15, 20 and 25-year bonds in exchange for shorter outstanding bonds,” Deputy Treasurer Eduardo Mendiola said on Tuesday.

He said the transaction is tentatively set for October.

The government currently has roughly 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.