A Primer on Sovereign Debt Buybacks and Swaps

Author/Editor:

Magdalena Polan ; Parmeshwar Ramlogan ; Carlos I. Medeiros

Publication Date:

March 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper sets forth some basic principles that could help debt managers in emerging market and other countries to plan and implement sovereign debt buyback and swap operations. It discusses the macroeconomic context in which buybacks and swaps are undertaken, the objectives of buybacks and swaps, the analytical framework for deciding whether to undertake a particular buyback or swap operation and for selecting among alternative operations, and some key issues in the determination of the strategy for executing buybacks and swaps. The focus is on developing the analytical framework for evaluating sovereign debt buyback and swap operations, since very little work has been done in this area. In this regard, the paper presents a step-wise decision-making procedure, in which discounted cash flow analysis and the use of strategic benchmarks for the debt play central roles.

Series:

Working Paper No. 2007/058

Subject:

Bonds Capital markets Currencies Debt management Government debt management

English

Publication Date:

March 1, 2007

ISBN/ISSN:

9781451866223/1018-5941

Stock No:

WPIEA2007058

Pages:

49

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