Treasury undertakes P323.5-B bond swap

The Government has swapped P323.5 billion worth of new 10-year and 20-year Treasury bonds for outstanding ones, the largest so far in terms of volume, according to Finance Secretary Cesar V. Purisima.

The Finance chief said that the second domestic bond exchange exercise under the Aquino Administration exceeded the volume involved in the five previous offerings.

The Bureau of the Treasury is issuing P67.6 billion worth of 10-year benchmark bonds due on Jan. 19, 2022, and P255.8 billion of 20-year benchmark bonds due on July 19, 2031.

The coupon rate for the 10-year bond was set at 6.375 percent, while that for the 20-year bonds was at 8 percent—the same as the minimum coupons previously announced.

Also, the debt swap will relieve the government some P152.6 billion in debt servicing over the medium term. This means that because old outstanding bonds have been exchanged for new ones that will mature much later, the government will not have to spend as much to redeem bonds that are about to expire.

The swap has extended the average maturity of the bonds from 5.48 years to 18.01 years.

The BTr said that the new issues, along with the 25-year bonds issued last December, would serve as benchmarks for long-term financing in line with initiatives to promote public-private partnerships in infrastructure projects and the development of capital markets.

“The transaction substantially reduced the bunching of the [Philippines’] debt maturities, particularly in the medium term, and significantly mitigates its refinancing risk,” Purisima said.

Development Bank of the Philippines and Land Bank of the Philippines were tapped as joint deal coordinators for the latest bond exchange.