(Bloomberg) -- Philippine banks are likely to start interest rate swap transactions on Monday, firing up a market that’s key to attracting more foreign capital into one of Asia’s fastest-growing economies.
Swap market makers are ready to trade, according to people familiar with the plan. But they said it remains to be seen how active the market will be when it’s reintroduced after waning with the cessation of the global use of the London Interbank Offered Rate last year.
The Bankers Association of the Philippines said in late September that the market will go live once the International Swaps and Derivatives Association recognizes the overnight reference rate, or ORR, which serves as the floating-rate benchmark. Market makers will quote two-way prices for swaps against the ORR.
There are good indications that the industry organization will publish the ORR on Friday and the plan is to begin trading the next business day, the people said, asking not to be identified discussing private information. Trading hours will be from 9am to 4pm, one of the people said.
Philippine banks worked with the Bangko Sentral ng Pilipinas to get a revamped market for interest rate swaps off the ground this year to create alternative benchmarks for pricing loans. Enhancing the market for bond repurchase agreements is also on the agenda.
The broader objective is to deepen the domestic capital market, which consequently will help businesses raise money aside from borrowing from banks and will provide more options for investors.
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