The country’s financial sector has been without viable benchmarks for pricing fixed income transactions since last year. — Bloomberg
MANILA: The Philippines wants to get a revamped market for interest rate swaps off the ground this year, as it seeks to enhance its capital market and grease the wheels for monetary policy. The step is one of two measures announced by Bangko Sentral ng Pilipinas (BSP) and commercial banks in Manila, which officials said would help trading and price discovery.
Developing the repo market for government securities is also on the agenda.
The country’s financial sector has been without viable benchmarks for pricing fixed income transactions since last year, when the scandal-plagued London interbank offered rate (Libor) ceased publication.
That’s a handicap for banks and limits the country’s ability to attract foreign capital.
As it stands, the market for government bonds is fragmented, which impacts the yield curve. Pricing loans are difficult, because they’re based on securities in which there is little trading.
“A benchmark yield curve would help in the pricing of bank loans and corporate bonds, and thus strengthen the transmission mechanism for monetary policy,” BSP governor Eli Remolona said on Monday.
He said the measure will help shorten the period of monetary policy transmission by as much as one and a half years. — Bloomberg
