PH debt prepayment not dependent on US interest rate normalization – De Leon

By , on August 2, 2017


De Leon said the government takes advantage of the low interest rate environment by swapping old debt instruments with new ones that have lower interest. (PNA photo)
De Leon said the government takes advantage of the low interest rate environment by swapping old debt instruments with new ones that have lower interest. (PNA photo)

MANILA, Aug. 2— National Treasurer Rosalia De Leon said the Philippine government will not be aggressive in prepaying its foreign currency- denominated debts solely because of hikes in U.S. interest rates.

She told PNA that movements in interest rates will not have immediate impact on government’s debts since majority of these liabilities have fixed rate.

“About 99 percent (of our debt) are fixed,” she said.

De Leon said the government takes advantage of the low interest rate environment by swapping old debt instruments with new ones that have lower interest.

“This is why we do liability management…We offer new bonds to retire the high coupon bonds when we see the economics,” she said.

The last time the government did a liability management exercise was in January 2017, when it accepted USD1.5 worth of dollar-denominated debt maturing from 2019 to 2037 that was submitted for swapping.

This was made as part of the Duterte government’s first 25-year global bonds issuance worth USD2 billion with a coupon rate of 3.70 percent, lower than the initial price guidance of 3.95 percent.

Tenders for this issuance reached USD4.5 billion while the 14 series of dollar bonds maturing between 2019 and 2037 amounted to USD19 billion.

De Leon earlier told journalists that the government is done with its liability management for this year while possible exercise for 2018 is being studied. (Joann Santiago/PNA)