UPDATE 1-Chile scraps plan to issue short-term treasury bills in 2014

Mon May 5, 2014 2:44pm EDT

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(Adds comment from government spokeswoman)

By Rosalba O'Brien

SANTIAGO May 5 (Reuters) - Chile's finance ministry on Monday scrapped the previous government's plans for issuing short-term treasury bills in 2014, citing problems with the way they had been designed.

In January, the ministry, then part of conservative Sebastian Pinera's government, had said that it would issue short-term treasury bills this year, for the first time in the history of Chile.

The debt, with maturity under a year, would optimize the management of the government's temporary cash surplus and raise short-term liquidity standards in line with international best practice, the ministry said at the time, adding that the schedule would be announced once legal procedures were completed.

But on Monday, the ministry - now under the control of center-left Michelle Bachelet, who took power in March - said alongside its publication of the 2014 bond schedule that short-term treasury bills would not be issued this year.

"As they were designed, the treasury bills did not improve handling of the cash surplus," said a spokeswoman for the finance ministry in comments emailed to Reuters.

"On the contrary, it was thought they would produce liquidity problems in the short-term market, so the administration decided to continue to analyze their benefits and costs in order to determine their eventual future use."

Chile's new government did however stick to the previous administration's plans to issue 6 billion dollars' worth of longer-dated Treasury bonds in the local market in 2014.

The local currency bonds would be issued monthly from May 13 to Dec. 10, the government confirmed on Monday.

(Editing by W Simon and Nick Zieminski)

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