Phl to pursue domestic debt swap

MANILA, Philippines - The government’s plan to swap outstanding shorter-dated debt in the domestic market with longer-dated papers will likely push through next year instead of this month, National Treasurer Rosalia De Leon said. She said the Bureau of the Treasury is still threshing out details of the plan.

 “Most likely it will be next year. We are still studying the details such as the interest savings to be derived from the transaction,” De Leon said.

She said the Treasury is still studying the “optimal structure” for the planned domestic debt swap.

 “We want to the structure with the maximum benefits,” she said.

The Treasury earlier eyed to have the debt swap in October, with a plan to issue 7, 10, 15, 20 and 25-year bonds in exchange for shorter outstanding bonds.

The move is part of the government’s debt liability management program as it seeks to consolidate all outstanding coupons in the market.

Officials said that in the past, there were coupons issued under a high interest rate environment but now that the rates are low, it’s time to consolidate all these into one uniform coupon that is close to the market.

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.