Philippines flags bond warranty to prevent sell-off

The sovereign hopes to avert a sell-off of government bonds by offering a warranty that replaces foreign-currency bonds with peso bonds.

The Philippine government is planning to offer warranties to its foreign-currency bondholders to counter a potential sell-off by investors as a result of the US credit crunch, according to a Reuters report posted yesterday.

The so-called Ɠpaired-warrantyƶ would replace the foreign-currency bond with a peso-denominated bond, in the case of default. The instrument differs from credit default swaps CDS which offer insurance to bondholders in the case of default, because it matches specific peso securities to holders of paired warrants,...

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