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Chile Plans $507 Million Inflation-Debt Swap to Boost Liquidity

February 11, 2013

Chile’s central bank plans to swap $507 million of new inflation-linked securities for old zero- coupon and amortizing debt as part of a plan to boost liquidity in its benchmark bond curve.

The bank will offer five-year indexed debt in exchange for amortizing inflation-linked bonds known as PRCs and zero-coupon securities called CEROs that were sold between 2000 and 2002, according to a statement on its website. The bank said it last offered a similar swap in the fourth quarter of 2010.

“They have done this before in response to an old recommendation of the International Monetary Fund, but the holders of the PRCs and the CEROs didn’t think it was very attractive” said Felipe Alarcon, an economist at Banco de Credito & Inversiones in Santiago who previously ran a markets desk at the central bank. “There aren’t very many PRCs and CEROs still around, but the idea is to make the benchmark curve more liquid.”

The swap offer will run from March 9 through May 8, according to the statement. The yield on five-year inflation bonds was little changed at 2.77 percent today.

Chile’s peso fell as copper declined on concern the sovereign debt crisis in the euro-area will slow growth and curb demand for metals. The currency slid 0.1 percent to 472.69 per U.S. dollar as of 12:16 p.m. in Santiago. Copper for March delivery fell 1.1 percent to $3.7205 a pound.

The peso has closed between 472 and 473 per dollar in the last four sessions.

To contact the reporter on this story: Sebastian Boyd in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

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