Govt launches debt swap, creates 25-yr bond market

The Bureau of the Treasury (BTr) on Wednesday said it will issue at least P30 billion worth of debt paper maturing in 2035, in the process creating a new benchmark rate for 25-year bonds. The BTr will also float P30 billion of new 10-year bonds maturing in 2020, in exchange for certain government securities that will fall due in 2011 and 2019. Such transactions are part of a peso bond swap initiated by the Aquino administration to manage the country’s domestic debt. The BTr is also asking holders of bonds maturing in 2011 and 2034 to sell these back to the government so that new investors could come in and buy the benchmark 25-year bonds. Proceeds from the subscription offer will “fund the tender offers from those who wish to sell their bonds back to the [government]," National Treasurer Roberto Tan said during the launch of the Domestic Debt Consolidation Program. “Hence, no new money will be raised by the Republic," he added. Government officials will know the price of the bonds as early as Thursday since banks that hold Philippine debt papers will start to make tender offers for the new issue starting Dec. 2-Dec. 10. As an offshoot of the domestic bond swap, the government will be able to establish a benchmark for long-term financing that supports initiatives promoting public-private partnership, said Deputy Treasurer Eduardo Mendiola. “It also seeks to extend the duration of the existing domestic debt with the exchange of existing government securities for longer dated securities as part of its proactive liability management program," he added. The government has tapped BPI Capital Corp., First Metro Investment Corp., Hongkong and Shanghai Banking Corp. Ltd., and Land Bank of the Philippines as joint deal managers and joint arrangers for the transaction. In bond swaps in 2006, 2007, and 2009 the government only offered three-year and 10-year bonds. — JE/VS, GMANews.TV