PH banks hope for new yield curve benchmark
The Philippine banking industry is hoping to launch a new benchmark yield curve before the end of this year, seeking to establish a more reliable reference for pricing debt than the gauge currently in use.
Paul Favila, secretary of the Bankers Association of the Philippines, said the Bangko Sentral ng Pilipinas has backed the initiative, with regulators and banks now working to establish the historical data needed to build confidence in the new benchmark.
Favila said lenders would need to demonstrate to borrowers that the new gauge at least moves in line with the existing benchmark, the Philippine Bloomberg Valuation (BVAL), before the market can transition.
“The aggressive one in me will say, by the end of the year, we should have something happening,” said Favila, who is also chief executive officer of Citi Philippines.
“It’s a live conversation with the BSP as well because we also want them to focus on transitioning the market. It takes two to tango. And they’re on board,” he added.
To deepen the local capital market, the central bank in 2025 adopted a globally recognized risk-management framework to guide banks in doing repurchase agreement (repo) transactions. That was preceded by the launch of a new peso interest rate swap market the year before.
Repos, also known as buybacks, involve the sale of debt securities with an agreement to repurchase them at a future date for a predetermined price. BSP Gov. Eli Remolona Jr. hoped the enhanced repo market and the revival of peso interest rate swaps would help build a more reliable yield curve for pricing loans and bonds, as he called the current benchmark “choppy.”
