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Buyback and Exchange Operations: Policies, Procedures and Practices among OECD Public Debt Managers

Author

Listed:
  • Hans J. Blommestein

    (OECD)

  • Mehmet Emre Elmadag

    (OECD)

  • Jacob Wellendorph Ejsing

Abstract

This 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.

Suggested Citation

  • Hans J. Blommestein & Mehmet Emre Elmadag & Jacob Wellendorph Ejsing, 2012. "Buyback and Exchange Operations: Policies, Procedures and Practices among OECD Public Debt Managers," OECD Working Papers on Sovereign Borrowing and Public Debt Management 5, OECD Publishing.
    • Handle: RePEc:oec:dafaaf:5-en
    DOI: 10.1787/5k92v18rh80v-en
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    Citations

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    Cited by:

    1. Elisa Faraglia & Albert Marcet & Rigas Oikonomou & Andrew Scott, 2019. "Government Debt Management: The Long and the Short of It," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(6), pages 2554-2604.
    2. Blix Grimaldi, Marianna & Crosta, Alberto & Zhang, Dong, 2021. "The Liquidity of the Government Bond Market – What Impact Does Quantitative Easing Have? Evidence from Sweden," Working Paper Series 402, Sveriges Riksbank (Central Bank of Sweden).
    3. Elisa Faraglia & Albert Marcet & Rigas Oikonomou & Andrew Scott, 2014. "Government Debt Management: The Long and the Short of It (Plus Appendix)," Working Papers 799, Barcelona School of Economics.
    4. Davide Debortoli & Ricardo Nunes & Pierre Yared, 2017. "Optimal Time-Consistent Government Debt Maturity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(1), pages 55-102.
    5. Piotr Bartkiewicz, 2021. "The evolution of the Polish government bond market," Public Sector Economics, Institute of Public Finance, vol. 45(1), pages 149-169.
    6. Thordur Jonasson & Mr. Michael G. Papaioannou, 2018. "A Primer on Managing Sovereign Debt-Portfolio Risks," IMF Working Papers 2018/074, International Monetary Fund.

    More about this item

    Keywords

    debt buybacks; exchange operations; liability management; sovereign debt management; switches;
    All these keywords.

    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

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