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Philippines: Cleaning up the curve

After the success of the first phase of the Philippines’ local debt consolidation programme, the republic’s treasurer, Omar Cruz, announced in August the launch of an additional debt exchange offer.

Part of Cruz’s efforts to “clean up the yield curve” of the government’s peso-denominated debt programme [see Meet the market man, this issue], the latest debt exchange plan will permit holders of eligible bonds to exchange their holdings for a new 10-year benchmark bond with a target size of P20 billion ($390 million).

The programme, managed by Credit Suisse, is beginning to pay dividends. In the first phase there were record issues of three-, five- and seven-year benchmark bonds. Trading in the new bonds has dominated market turnover and the bid-offer spreads have narrowed, leaving investors happier and the government with a lower borrowing cost. The issues have also encouraged corporate borrowers to tap the domestic debt markets, with issues from such companies as Petron, Philippine National Bank and Ayala Corporation since the launch of the programme: all further evidence that the government is finally getting its fiscal house in order.

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