PH plans to swap short-term local debt for longer tenor in H2


Posted at Jul 11 2014 05:00 PM | Updated as of Jul 12 2014 01:00 AM

MANILA - The Philippines plans to swap shorter-dated local debt for longer tenors of up to 25 years in an offer that may be launched before year-end as part of its debt-management programme, a senior official said on Friday.

National Treasurer Rosalia de Leon said the government has yet to decide the offer size, though she said at least P50-P60 billion ($1.2 billion-$1.4 billion) is needed to make it liquid.

"We are looking at 10, 20 and 25 years depending on what will give us the best opportunity," de Leon said, adding the timing has not been set.

The Philippines has been capitalising on a shift by investors to emerging markets to lengthen its maturities. It also wants to reduce foreign-exchange exposure by increasing the share of peso-denominated debt in total bond sales.

The government relies on onshore and offshore borrowings to bridge its budget deficit, which is expected to reach 2 percent of gross domestic product this year. Foreign borrowings include concessional loans from other governments and multilateral agencies.

The Department of Finance has set an 85-15 borrowing mix in favour of domestic borrowing this year, and a target of 86-14 next year.

In the January-May period, the budget deficit was 8.56 billion pesos, or just 3.2 percent of the targetted full-year deficit of 266 billion pesos.

Manila's last domestic bond exchange was in July 2011, when a record 323.5 billion pesos of new 2022 and 2031 bonds were issued. The debt exchange extended the average maturity of the local bonds swapped to 18 years from about 5.5 years.

Ratings agencies Fitch Ratings, Standard & Poor's and Moody's raised the Philippines to investment grade status last year, citing the government's improving public finances and other factors.

In May, S&P raised the Philippines' credit rating to two notches above investment grade, saying reforms are likely to continue beyond President Benigno Aquino's term, which ends in 2016.