The Bankers Association of the Philippines (BAP) has officially launched the enhanced peso interest rate swap (PESO IRS) market, effective Monday, 18 November. This move follows the release of updated international swaps and derivatives association (ISDA) definitions the previous Friday, which includes the Philippine overnight reference rate (ORR) as a key benchmark for the new market.
The enhanced PESO IRS market aims to foster the development of yield curves that can better support the pricing of short-term credit instruments, including loans. The Philippine ORR, based on the Bangko Sentral ng Pilipinas’ (BSP) variable overnight repurchase rate, will serve as a crucial anchor for pricing in this market.
Paul A. Favila, chairman of the BAP Open Market Committee, emphasized the market’s importance for creating a more dynamic pricing environment. “The enhanced PESO IRS market will help build yield curves that better reflect market conditions and improve the pricing of short-term loans,” he said.
To ensure liquidity and accessibility, 16 BAP member-banks have been designated as market-makers. These include major financial institutions such as BDO, BPI, China Bank, Metrobank, Philippine National Bank, and international banks like Citi, Deutsche Bank, and HSBC. Additionally, five other banks will participate regularly in the market, including BDO Private Bank and Maybank.
The market will be facilitated on Bloomberg’s trading platform, with the BAP confident that widespread participation will lead to stronger benchmark rates. “The launch of the enhanced PESO IRS market, along with the establishment of a government securities repo market, are critical steps toward growing the Philippine capital market,” said BAP president Jose Teodoro K. Limcaoco.
The BAP said this development will help align the country’s financial instruments more closely with international standards, making them more accessible and reflective of current market dynamics.
