THE Bankers Association of the Philippines (BAP) launched its enhanced peso interest rate swap (IRS) market yesterday, November 18, with an initial 16 banks that have committed to be market-makers for the overnight reference rate (ORR).
The Peso IRS ORR is based on the variable overnight reverse repurchase rate (RRP), and is set to ensure that there will be prices for swaps of various maturities for 30 days up to 10 years, providing a new way to hedge or take positions.
“We are excited for Peso IRS to go live to help boost transactions, create a benchmark yield curve, and deepen our capital markets,” Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona Jr. said.
“A benchmark curve yield will help banks and other lenders price loans at various maturities. This whole effort is just one of many steps the national government, the BSP, and Philippine and foreign banks are working on very closely together to achieve these objectives. Foremost among these is to provide the liquidity investors need to invest in our fast-growing economy,” he added.
The Peso IRS ORR was announced in September, while the ORR was recognized by the International Swaps and Derivatives Association (ISDA) last week.
Bloomberg will serve as the trading platform for the Peso IRS, which will be based on the daily variable RRP published by the central bank.
Among the 16 bank market-makers that will quote two-way prices for the short- and long-term swaps are the Bank of the Philippine Islands (BPI), BDO Unibank Inc., China Banking Corp., East West Banking Corp., Metropolitan Bank & Trust Co. (Metrobank), Philippine National Bank (PNB), Security Bank Corp., and Rizal Commercial Banking Corp. (RCBC).
Also included are the Union Bank of the Philippines, Australia and New Zealand Banking Group, Citi, Deutsche Bank, Hongkong and Shanghai Banking Corp. (HSBC), ING Bank, JP Morgan Chase, and Standard Chartered Bank.
Five banks will also serve as regular participants: BDO Private Bank, Maybank, Mizuho, MUFG, and SMBC.
“The enhanced Peso IRS market aims to promote development of yield curves to further support the pricing requirements of short-term credit instruments, such as loans, in the market,” BAP Open Market Committee chairman Paul Favila said earlier.
“The launch of the enhanced Peso IRS market, together with the creation of a repo market for government securities, are valuable steps towards growing our Philippine capital market,” BAP president Jose Teodoro “TG” Limcaoco said.
Moving forward, the BSP, in partnership with the national government, Philippine banks, and foreign partners are also working on several initiatives such as creating more liquid benchmarks by concentrating issuance and bond reopenings in a few selected maturities. (GMA Integrated News)
