He Public Debt Coordination Committee (CCDP) integrated by the Central Bank of Uruguay (BCU) and the Ministry of Economy and Finance (MEF) met on Monday with various topics on the table, among which he highlighted the evolution of the domestic government bond market in recent months, as well as the “appetite” of investors for the instruments in pesos.
The government has a good eye on the debt, especially after the warning of the International Monetary Fund (IMF) regarding the “historically high levels” of indebtedness in relation to the Gross Domestic Product (GDP). In this sense, the CCDP worked as one of its central topics the analysis of the evolution of the domestic market of public securities in the last months.
This, within the framework of public debt management strategy that the government has, which seeks to place a greater part of the instruments in pesos in order to, in turn, manage the debt in pesos.
In this regard, the Committee formed by the BCU and the MEF shared views on what happened in the domestic market during the first quarter, and concluded that “there is a investor appetite by the debt securities issued by the monetary authority in their longest terms, causing the yield curve of the debt securities issued by the BCU to have inverted”.
Among the examples that can be pointed out regarding this strategy well received by investors is the recent placement of 1,248 million pesos in a Treasury Note in Indexed Units (UI) —Series 29— maturing in 11 years, on August 28, 2034.
The amount to bid stipulated by the Public Debt Management Unit (UGD) It was 200 million UI —approximately 1,147 million pesos or 29.6 million dollars. However, as the State has within its powers to end up awarding up to double the amount auctioned, it ended up placing a little more than what was offered: 217.5 million UI —1,248 million dollars or 32.2 million dollars —, 8.75% more than expected.
Another significant example occurred at the beginning of March, when the UGD awarded 3,700 million pesos in a Treasury Note in Pension Units (UP) —Series 5—, doubling the original tendered amount of 1,200 million UP. Among its conditions, this title has a 2% annual coupon and semi-annual interest payment, every March 1 and September 1, until September 1, 2047, the expiration date. The amortization, for its part, will be in three consecutive annual payments in the last three years of the term, on September 1, 2045, 2046 and 2047.
A historic joint issue
Another of the issues discussed in the CCDP was the evaluation of the joint issue and exchange operation of debt securities that, historically, was carried out by the BCU and the MEF at the beginning of February, with the extension of Treasury Notes already issued: one in UI, another in pesos and two in UP; for 507 million dollars.
In this sense, the committee positively valued the initiative, noting that “the objectives were metin particular, extending the average maturity and softening the maturity profile of the public debt securities of the consolidated public sector, as well as continuing to deepen the development of the domestic market for public securities”.
The next meeting of the CCDP will take place in June, to analyze the results of the debt management strategy corresponding to the second quarter and the first half of the year.
Source: Ambito
