The Bangko Sentral ng Pilipinas (BSP) is on track to creating a credible and reliable benchmark for a yield curve that is market-determined, according to officials.

The BSP is targeting to have a credible yield curve that is tenor-based, transactable, and transparent by the end of 2023 or early next year. I Photo: Bangko Sentral ng Pilipinas
In a press briefing on Wednesday, BSP Senior Assistant Governor Maria Ramona Gertrudes T. Santiago said the “ultimate objective is to have a market-determined benchmark for the yield curve.”
The BSP is targeting to have a credible yield curve that is tenor-based, transactable, and transparent by the end of 2023 or early next year.
Santiago said the BSP wants to develop a benchmark for the government securities market and to do this, they have to increase the market volume, such as on the 5- and 10-year tenors to get to a benchmark that is market-derived and not model-derived.
“To achieve that, the so-called market makers have to be able to quote bid and offer spreads,” she told reporters.
A market-maker trades securities and other instruments and creates a market for it by providing liquidity. At the moment, these market-makers, which are mostly banks, have their “hands tied” because there is not enough liquidity or volume to auction securities in the market.
This is where the BSP has to develop the reverse repurchase agreement (RRP) facility or repo market. The recent changes to the RRP facility and the start of a variable-rate RRP auction to get an overnight RRP rate will help develop a yield curve over time.
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