Buyback and Exchange Operations: Policies, Procedures and Practices among OECD Public Debt Managers
AbstractThis paper reports on a survey carried out among OECD government debt managers on the use of bond buybacks and exchange operations. The survey shows that government debt managers use extensively bond buybacks and exchanges (often referred to as "switches") as liability management tools. Bond exchanges and buyback operations serve two main purposes. First, by reducing the outstanding amounts of bonds close to maturity, exchanges and buybacks help in reducing roll-over peaks and thus lowering refinancing risk. Second, exchanges and buybacks allow debt managers to increase the issuance of on-the-run securities above and beyond what would otherwise have been possible. The resulting more rapid build-up of new bonds enhances market liquidity of these securities. This in turn should eventually be reflected in higher bond prices. Hence, bond exchanges and buybacks are aimed at lowering refinancing risk. In addition these operations may also contribute to lower funding costs for governments.
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Working Papers on Sovereign Borrowing and Public Debt Management with number 5.
Date of creation: 13 Sep 2012
Date of revision:
liability management; exchange operations; debt buybacks; switches; sovereign debt management;
Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-22 (All new papers)
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