Philippine banking assoc unveil new interest rate swap market

The central bank expects PESO IRS to boost transactions.

The Bankers Association of the Philippines (BAP) has launched an enhanced PESO interest rate swap market (PESO IRS).

PESO IRS will be anchored on BAO’s Philippine Overnight Reference Rate (ORR).

Sixteen (16) banks have committed to be market makers for the ORR-based IRS. The banks are tasked with ensuring that the prices for swaps of various maturities, from1-month to 10-year.

The ORR, in turn, is based on the variable overnight reverse repurchase rate (RRP), to which the Bangko Sentral ng Pilipinas (BSP) shifted last year.

BSP governor Eli M. Remolona said that PESO IRS will help boost transactions, create a benchmark yield curve, and deepen our capital markets.

“A benchmark curve 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,” Remolona said.

Foremost amongst these is to provide the liquidity investors need to invest in our fast-growing economy, he added.