European countries are gearing up for some large bond repayments over the next few years and to alleviate some chunky payments they are looking to swap out expensive debt issued at the highs of the crisis for new lower yielding bonds.
Spain and Italy are the latest to start planning moves with the Spanish last week selling €9bn in 10 year bonds of which more than a third of which went on an exchange with bond holders of debt maturing in 2015 . They have around €500bn maturing over the next 4 years.
Today Italy announced that it is looking to swap out €2.5bn in 2015 maturing BTP’s for a 2022 issue.
Although we’ve seen bond yields crumble there’s still an awful amount of debt paying incredibly high interest rates that governments have to cover. Swapping out debt is one way of lengthening out the process and making it easier on the finances. The question will be how much appetite there is for rolling over debt or whether some will go looking for a better yield elsewhere.
I suspect that yields are still enticing enough that governments would get a good take up. Another 1% or 1.5% lower and that may change the landscape.
