By Riza Lozada
The Bangko Sentral ng Pilipinas (BSP), the Department of Finance (DOF), the Securities and Exchange Commission (SEC), and the Bureau of the Treasury (BTr) launched a joint initiative to spur the development of the domestic debt market.
The initiative was presented at a recent workshop on Local Currency Debt Market Development held at the BSP Complex with the Bankers Association of the Philippines, the Money Market Association of the Philippines, and other market participants and stakeholders.
The workshop builds on the statement of Finance Secretary Carlos Dominguez III on the importance of developing the domestic capital market.
Dominguez said the development of the domestic capital market will provide complementary local currency resources for our infrastructure program and reduce our vulnerability to vicissitudes in the external environment.
BSP Governor Nestor Espenilla Jr. said that a well-developed money and long-term debt markets augment the effective transmission of monetary policy through the economy.
National Treasurer Rosalia de Leon said money and government bond markets together provide a foundation that can support the mobilization of savings for financing the government’s and private sector’s investments and that the reforms will result in broadening the variety of investment choices for the public.
SEC Commissioner Ephyro Luis Amatong added the reforms aim to enhance the liquidity, depth, and resiliency of both money markets and government bond markets.
The proposed reforms seek to increase efficiency and reduce the cost of dealing in government bonds, provide market incentives to increase levels of participation, introduce new products including hedging tools based on global standards, and reduce disparity in the pricing of government bonds.
Among the salient features and innovations that will be introduced under the reform package include a permanent increase in the volume of treasury bills, the consolidation of government bonds into six tenors of two, three, five, seven, 10, and 20Y, the adoption of common semi-annual coupon payment dates, the designation of market makers with concomitant obligations and privileges, the introduction of a stable repurchase market, the consideration of a self regulatory organization (SRO) forover the counter market, and regulatory reforms to support the adoption of a market-based benchmarks.
The reforms will be undertaken over 18 months upon formal launch with specific targets for regulatory and institutional milestones every six months.