Gov’t relaunches domestic bond swap

MANILA, Philippines - The Philippines launched its first domestic bond swap in three years, offering for exchange at least P60 billion in 10-year bonds.

National Treasurer Rosalia de Leon said the minimum coupon rate was set at four percent.

Up to P2 trillion worth of outstanding Treasury bonds are eligible for the debt swap.

 The new bonds will be swapped for shorter-dated paper as it harnesses investor interest to lengthen its maturity profile and deepen the local debt market.

 The swap would help establish a benchmark for long-term financing as the government tries to attract private investors for its much-needed infrastructure projects.

Among the six financial institutions that were tapped to manage the debt swap are Land Bank of Philippines, Development Bank of the Philippines, BDO Capital and Investment Corp., First Metro Investment Corp., BPI Capital Corp., and HSBC.

The swap is part of the government’s plan to smoothen its debt maturity profile and  extend the maturity of existing peso-denominated liabilities.

 It is also aimed at establishing liquid benchmarks at the long end of the curve.

The last time the government conducted a domestic bond exchange was in July 2011 in which it issued  P323.5 billion worth of new 2022 and 2031 bonds.

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 advantage 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.