LONDON: Spain may use bond switches and buy-backs later this year, its head of funding said on Tuesday, aiming to take advantage of cheap rates and stop investors worrying about how it will manage its debt repayments.
Such measures to delay near-term debt redemptions have already been taken by other vulnerable countries in the euro zone like Italy which were forced to concentrate debt issuance in shorter tenors when the sovereign debt crisis hit.
More than half of Spain's 914 billion euro ($1.26 trillion)debt matures within the next four years, according to Thomson Reuters data.
This year, Spain's cost of borrowing over 10 years has dropped to the lowest levels since late 2005. "We are well advanced in our funding programme, and we can think strategically into the next few years.
Therefore, we can dedicate more time to actively managing the debt profile now than before," Pablo de Ramon-Laca, head of funding and debt management at the Spanish Treasury, told Reuters.
"Generally speaking, liability management can be carried out through bond switches, buybacks via auction or syndication."
Spain had issued over a third of its 133.3 billion euros of scheduled bond issuance for 2014 by the end of March.
Asked if steps such as directly buying back bonds approaching maturity or swapping them for longer-dated paper would be taken this year, Ramon-Laca said he would not rule out the possibility.
Liability management, alongside the issuance of longer-term bonds, would help the treasury maintain, or even increase, the average life of its debt. That has been falling since 2010 and turning the trend around is a priority in its 2014 funding strategy.
Ramon-Laca said while the Treasury had not done any 'active' liability management since 2006, it had taken passive measures such as issuing more longer-dated bonds to replace short-dated Treasury Bills.
He cautioned, though, that any future measures would have to make financial sense.
"It is not an obvious decision because improved market conditions enrich bonds that we would be buying in these operations It may not reduce your debt by as much as you may think it will.
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