The Treasury went to the market this Wednesday for a debt exchange operation. It bought securities that matured in 2021, issuing in return bonds with a maturity of nine and 15 years.
532 million in public debt due in 2021. In the Treasury Bond (T-bond) exchange operation, the Treasury and Public Debt Management Agency – IGCP issued, in return, new securities that only mature within nine and 15 years.
This was the sixth debt exchange operation carried out this year by IGCP and is in line with the strategy of taking advantage of current low interest rates to issue cheaper securities and extend repayment maturities. The total amount of T-bond that has been pushed since the beginning of the year, to a later date, already amounts to 4.3 billion euros.
The agency led by Cristina Casalinho bought, on the one hand, 532 million euros of T-bond that reached maturity on April 15th, 2021. In exchange, the Treasury issued 360 million euros in bonds maturing on October 17th, 2028 and another 172 million euros maturing on April 18th, 2034.
These debt swaps allowed the country to smooth payments to the markets in the coming years and avoid the accumulation of repayments. In 2021, the level was particularly demanding: there were almost 15 billion euros to return to investors, and this operation will help to reduce this financial effort.
The strategy is made possible by the low cost of funding, driven by the monetary policy of the European Central Bank (ECB). The new debt issued by Portugal had an average interest rate of only 1.1% between January and October, the lowest ever. In the secondary market, the 10-year Treasury Bonds trade with a yield of 0.375% and the 15-year Treasury Bonds trade with a yield of 0.755%.
Therefore, IGCP is able to exchange more expensive bonds for cheaper ones and, simultaneously, increase the average maturity of the debt, in a strategy that reduces the risk of debt management.