What is a Public Debt Trading Operation?

The money that the state has to manage in treasury and debt is administered by a public entity called IGCP. Today, this same body carries out an operation to exchange Treasury Bonds, whose maturity was 2015 and 2016, for Bonds maturing in 2021 and 2023.


First It Is Necessary to Clarify: What are Treasury Bonds?

First It Is Necessary to Clarify: What are Treasury Bonds?

Since the money that the State has to manage does not come only through the collection of Taxes, as well as the families, the State also has to resort to external financing. The way the state most uses to finance itself is through the issuance of Treasury Bonds (for long-term issues) or Treasury Bills (for short-term issues). These bonds are placed on the market by decision of the IGCP and are securities that represent a right of the buyer to receive the amount invested in a previously established time horizon (with maturities up to 50 years), with an associated interest (fixed rates) . In fact, you can always see the latest Variable Income Treasury Bonds.

Today IGCP is making an operation to exchange Treasury Bonds, that is, it will issue debt that it will use to repay the debt that expires.


Why is IGCP doing this operation?


The State’s level of indebtedness is among the highest in the history of our country, so the option to resort to more indebtedness would not be surely responsible (as we have seen with Portuguese families and their relentless search for personal credit). However, funding needs exist and you need to know how to manage these sources. In conducting an exchange of bonds for bonds maturing in 2015 and 2016, the State proposes to pay the same amount of these bonds but now within 2021 and 2023.

This “smoothing of debt peaks” operation allows repayment to creditors of state debt to be better distributed over the years. Since the State knows that in 2021 and 2023 it will not have as high values ​​in its treasury as the projections for the next two years, the IGCP chooses to place in these years the result of this exchange operation of Obligations. In this way you can manage your short-term treasury by making other options without falling into a “bottleneck” in debt. In making this better distribution of repayments, one notices that the State is cautioning to make advance payments on larger and heavier debts, without having to resort to new financings, such as the current debts to the International Monetary Fund.

For this to be successful, investors need to believe that Portugal will be able to meet its obligations in 2021 and 2023, just as they believed it would do next year.