Gov’t plans another bond swap this month

The Bureau of the Treasury (BTr) is planning to swap shorter-dated bonds for new issues of 10-year and 20-year bonds in line with efforts to consolidate and lengthen the average maturity of the government’s debts.

Deputy Treasurer Eduardo S. Mendiola said Tuesday in an interview that the plan, which is still subject to the approval of Malacañang and the Bangko Sentral ng Pilipinas, was to exchange bonds that were falling due in less than 10 years for the new bonds.

The BTr wants to start the “bond swap offer on June 28, with closing on the first week of July and settlement on the following week,” Mendiola said.

Asked how much the BTr wants to swap, he said it would be “whatever the arrangers can come up with.” This means that there will be no minimum volume of offer.

Land Bank of the Philippines and Development Bank of the Philippines have been named arrangers of the planned swap, while First Metro Investment Corp., BPI Capital Corp., SB Capital Investment Corp. and Citibank have been tapped as joint managers.

“We are confident that the volume of the bond swap conducted last December can be matched by this new exchange,” Mendiola said.

Mendiola was referring to the P190 billion worth of old debt that was traded for new 10-year and 25-year bonds, and the P10 billion that was raised as a new debt.

Asked whether the planned bond swap would also raise new money, he said that could not be discounted. “But hopefully, we would not need that anymore,” Mendiola added.

In the meantime, the yield on the 10-year treasury bond on Tuesday eased to an average of 6.436 percent, 6.5 basis points lower than the 6.4 percent for done deals in the secondary market.

Tuesday’s average was 0.9 basis point lower than the 6.445 percent for the most recent 10-year issue that was awarded in the primary market last April.

Investors tendered a total of P21.246 billion or more than twice the volume on offer. The BTr raised P9 billion as planned from Tuesday’s issue.

Tuesday’s offer was a reissue of 10-year bonds that were first issued on April 28, which means that the bonds have nine years and 10 months until maturity.

Mendiola, who chaired the auction committee, said the auction results may be related to the BSP’s decision last week to keep policy rates unchanged.