Hi guys,I just read this news :http://www.bloomberg.com/​news/2012-03- ... ​htmlabout the Swap/Swaption trade between Italy and M.S. Looks like Italy tried to extend their 10 year bond to 30 year bond using swaps.I'm just curious how they exactly extended a bond through a swap/swaption? how is the trade structured, can you guys share with me some thought?

many different ways - you can enter a forward starting swap for example ?

more in detail?

they may have been selling out-of-the-money swaptions to generate revenue in the hope they would never be exercised, and lo and behold they're now in-the-money

hi Guys,Thanks for all your comments.I just dont know: HOW THEY EXTEND A 10 YEAR BOND INTO 30 YEAR BOND USING SWAP/SWAPTIONS? DaveAngel's answer is forward starting swap, but you're also paying in the forward start swap ,right? how is the bond extended then... I just still don't get it.

hi P,Can you give more detail?

QuoteOriginally posted by: wpjwpjgghi Guys,eThanks for all your comments.I just dont know: HOW THEY EXTEND A 10 YEAR BOND INTO 30 YEAR BOND USING SWAP/SWAPTIONS? DaveAngel's answer is forward starting swap, but you're also paying in the forward start swap ,right? how is the bond extended then... I just still don't get it.by paying fixed you (or Italy) have locked in the rate for 10 years. so when their existing debt matures they issue new debt at the market price, redeem the old debt and close out the swap. if the coupon at this time is higher than the rate then MS pays them the difference, if the coupon is less then they pay MS the difference in effect

"so when their existing debt matures they issue new debt at the market price, redeem the old debt and close out the swap"whether the new PV of the debt will be lower then PV of the old debt or it remains unchanged?

QuoteOriginally posted by: list"so when their existing debt matures they issue new debt at the market price, redeem the old debt and close out the swap"whether the new PV of the debt will be lower then PV of the old debt or it remains unchanged?what do you think the pv of the debt will be on its maturity ?

QuoteOriginally posted by: daveangelQuoteOriginally posted by: list"so when their existing debt matures they issue new debt at the market price, redeem the old debt and close out the swap"whether the new PV of the debt will be lower then PV of the old debt or it remains unchanged?what do you think the pv of the debt will be on its maturity ?i meant say a company or a country could not pay debt on time. they issue new bonds which cash will partially cover previous debt. but in general after restructuring and issuing new bonds whetere PV of the debt looks better or whethere PV available cash/ PV debt ratio is looks better?