Gov’t to hold local bond swap

MANILA, Philippines - The government will hold a local bond swap before the end of the year to sustain the decline in its debt burden.

National Treasurer Rosalia De Leon said the size, timing and structure of the debt swap has yet to be finalized.

The government, however, is consider- ing issuing bonds with tenors of 10 and 20 years but the details of the offering would all depend on the impact of the interest rate hike that was approved by the central bank last week.

It has tapped six financial institutions that will form part of the consortium of deal managers. These are the Land Bank of Philippines, Development Bank of the Philippines, BDO Capital and Investment Corp. First Metro Investment Corp. BPI Capital Corp. and HSBC.

The government will swap shorter- dated local debt for longer-dated tenors as part of a plan to smoothen its debt maturity profile by extending the maturity of existing peso-denominated liabilities.

The bond swap is also aimed at estab- lishing liquid benchmarks at the long end of the curve.

The last time the government con- ducted a domestic bond exchange was in July 2011 in which a record P323.5 billion worth of new 2022 and 2031 bonds had been issued.

The debt swap extended the average maturity of the local bonds exchanged to 18 years from around 5.5 years.

The Philippines wants to take advan- tage of strong investor appetite for high returns offered by emerging markets to lengthen its debt maturity profile. It also intends to further cut foreign-exchange exposure by increasing the share of peso- denominated debt in total bond sales.