A Domestic Debt Switching Programme, spearheaded by the Government that forms part of its liability management strategy, has been implemented. The focus is on Government securities scheduled to mature in the coming 12 months, where the Sell Switch Auction of Government of Mauritius Securities was held on March 9 for a nominal amount up to Rs2,000 million for settlement on March 11.
The programme, a press release reads, constitutes the Medium-Term Debt Management Strategy and is designed to mitigate refinancing risks, extend the average maturity profile of domestic debt, and enhance liquidity in the domestic bond market.
A switch or exchange is defined as a mechanism with the Bank of Mauritius (BoM), acting as the Government agent, designed to enable Primary Dealers to exchange their existing Government Securities (source bonds) for other Government Securities (destination bonds).
The switching operation adheres to the Government’s commitment towards fiscal discipline, reinforcing long-term sustainability while at the same time helping to deepen the domestic capital market with transparency, investor engagement, and efficient management as commitment.
The objectives of the Switching Programme aim to: smoothen the redemption profile of Government securities and reduce the volume of debt maturing within a period of up to 12 months; lengthen the average time to maturity (ATM) of domestic debt; lower the rollover risk and ensure smoother debt service profile; increase liquidity in longer-dated benchmark bonds; and support market development by encouraging long-term investor participation.
There are several prospective benefits to investors, such as the opportunity to lock in long-term interest rates, diversification of maturity profile, reduction of reinvestment risk on near-maturity securities, no capital outlay required – exchange existing holding and the opportunity to convert existing holdings of less liquid Government securities that trade infrequently into larger, more liquid benchmark Government securities.
