Treasury targets June 28 to launch peso debt swap

Inspired by the success of its P199-billion debt swap last December, the Bureau of Treasury (BoT) is poised to offer about the same amount of bonds in another move meant to lighten the government’s medium-term payments burden. June 28 is the target launch for the transaction, said Deputy Treasurer Eduardo Mendiola, who disclosed that the BoT is now awaiting clearance from Malacañang and the Bangko Sentral ng Pilipinas. The plan involves offering 10-year and 20-year bonds in exchange for previously-issued bonds bearing shorter dates. The Land Bank of the Philippines and the Development Bank of the Philippines will handle the debt swap. Four private banks, First Investment Corp., BPI Capital Corp., SB Capital Investment Corp. and Citibank, are the joint issue arrangers. New 2020 and 2035 bonds were issued in the previous swap. Of the amount, the 2020 bonds totaled P30 billion and the 2035 papers totaled P170 billion. As part of that exchange, the government also issued P16 billion in new 2035 bonds partly to buy back a chunk of local debt. The government in September had a dollar debt swap worth $2.99 billion. The BoT issued $2.04 billion of new 2021 US dollar bonds and $950 million of reopened 2034 US dollar bonds. It also sold $200 million of new bonds due 2021. This year’s target budget deficit is P290 billion, representing 3.2 percent of the gross domestic product. Also on Tuesday, the BoT sold P9 billion worth of 10-year Treasury bonds as part of the P117 billion in auctions programmed from April to June. Bids ranged from 6.3 percent to 6.5 percent. Tenders were more than double the offered amount, reaching P21.246 billion, which Mendiola said indicates substantial liquidity in the market. “The interest rate is within secondary market rates," Mendiola said. “We can relate this to the BSP action of not raising rates. Interest rates would have followed or increased had the BSP raised it," he added. The BSP Monetary Board last week decided to maintain its overnight borrowing rate at 4.5 percent and the overnight lending rate at 6.5 percent, but still took action to reduce market liquidity by raising the regular reserves requirement to 9 percent from 8 percent. — ELR/VS, GMA News