In an effort to improve bond market liquidity and trading, the Philippine central bank announced the launch of an interest rate swaps market anchored to a recently established benchmark rate on Monday ( November 18 ).
The Bankers Association of the Philippines helped establish the benchmark, the overnight reference rate ( ORR ), which the International Swaps and Derivatives Association recognized.
By facilitating the exchange of fixed and floating attention rate streams, the IRS, a standard feature of created fixed-income markets, enables parties to maintain rate risk or place bets on the direction of borrowing costs.
The central bank’s regular opposite repurchase auctions, which will be based on the ORR, are anticipated to serve as a better standard for sales loans, which are currently based on produces from thinly traded government stocks.
” We are excited for PESO IRS to go live to help improve purchases, create a standard yield curve, and strengthen our money markets”, central banks Governor Eli Remolona said in a statement. Bankers and other lenders can use a standard curve to determine the cost of loans with several maturities.
The central banks stated that 16 banks have made the commitment to be the ORR-based IRS’s business makers, ensuring costs across maturities from one month to ten years and improving interest price transparency.
Bangko Sentral ng Pilipinas added that it is considering signing world learn repurchase partnership agreements to raise the federal securities repo marketplace.