Speaking at the 6th Annual dbAccess Philippines Conference, governor Nestor Espenilla Jr laid out a roadmap for reform which includes increasing the volume of treasury bills, provide a transparent mechanism covering the issuance of government securities and strengthening regulatory oversight over the repo and fixed income market.
The launch of a repo market was first proposed by Espenilla’s predecessor Amando Tetangco Jr in August 2016.
Espenilla, who has worked within central banks for 36 years, said: “In this invitation, there is the simple but powerful recognition that new leadership does not necessarily mean the exclusion of either one of these possibilities of continuity and change … there is no need to choose one path over the other.”
The Bureau of the Treasury has been sending “report cards” to Government Securities Eligible Dealers (GSEDs) since June highlighting their performance in the primary and secondary markets.
These will serve as basis for future recognition of market makers.
“We have seen performance of GSEDs improve following the release of these report cards and the unveiling of the roadmap, through improved subscriptions, higher participation in pre-auction surveys, and more GSEDs providing indicative bids.”
“Bid submissions show tighter convergence and presence of outliers are now more limited. From a difference between the highest and lowest bids of 190 basis points (bps), spread is now around 25 bps.”
BTr will announce the preliminary market makers and will launch the actual enhanced GSED programme early next year.
“We will follow a coordinated and deliberate sequenced approach to ensure smooth implementation of these reforms,” Espenilla added.
Philippines already boasts an active securities borrowing and lending market, which has been in place since 2006.
The market is bilateral or can be conducted via an intermediary, although it is known to suffer from limited supply.