Public Debt


What is Public Debt?
Public Debt is any financial obligation (such as bonds or loans) assumed by the government, where it agrees to make interest and principal payments on certain dates. Public or government debt includes the debt of the Department of the Treasury, the Central Bank and Corfo. There is also foreign debt related to sovereign bonds issued abroad, and government notes in US dollars the government owes the Central Bank, and notes issued by the Central Bank (PRC, BCP, BCU, and BCD, among others).
What area of government is responsible for public debt strategy?
The International Finance Unit of the Finance Ministry is in charge of proposing and implementing strategies regarding public debt through the Bureau of Public Debt.
What is the purpose of public debt (bond) issues?
The purposes are: (a) to develop and maintain an efficient and high-quality bond market, establishing referential rates for the local financial market and local businesses; (b) to encourage the participation of foreign investors in order to achieve financial integration of our economy with international markets; and (c) to ensure the financing needs of the government and reduce long-term financing costs given prevailing risk.
What are the main domestic debt issues?
The government issues peso- and UF-denominated bonds in the domestic market. These issues provide referential real and nominal interest rates for other domestic debt. In 2008 there have been issues of 10-year peso bonds (BTP-10) and UF-denominated bonds with maturities of 20 and 30 years (BTU-20 and BTU-30).
Is the Central Bank authorized to issue bonds?
Yes, the bank also issues bonds. Both the bank and the Finance Ministry periodically coordinate their planned debt issues.
How are government bonds issued and placed on the market?
The annual maximum limit for the amount of debt that the government is allowed to contract is stated in the annual budget law. The government issues dematerialized bonds through the General Treasury of the Republic. The Central Bank then carries out monthly bond auctions on dates published on a calendar in the amounts established by the Finance Ministry.
Who participates in the treasury bond auctions?
Institutional investors including banks, mutual funds, pension funds, and insurance companies.
Where can you find information on bond auctions?
Information on the auctions can be found on the Websites of the Finance Ministry and of the Chilean Central Bank.
When did the government begin issuing bonds?
The government has been issuing bonds in the local market since 2003. It has been issuing sovereign bonds in foreign markets since 1999, but the last issue of this type was in 2004.