THE Bangko Sentral ng Pilipinas wants to further develop the money and corporate bond markets to better reflect monetary policy, BSP Governor Eli Remolona said on Monday.
In the Philippines, money markets handle short-term (under one year), low-risk debt instruments like Treasury Bills and time deposits. The corporate bond market consists of medium-to-long-term, higher-yield debt issued by private companies for expansion. Both markets are integral to the Philippine financial system, which is dominated by government securities (over 85 percent of the total bond market).
Remolona referred to them as “makeshift markets,” which could do better with help from the central bank. He described corporate bonds as the spare tire of the financial system, which needs to be more accessible to small companies.
To the question of which markets best manage equity and which best reflect policy rates, Remolona said he was surprised that the FX (foreign exchange) swaps market was preferred over the interbank call market. He found it “weird“ since FX swaps need dollars for peso liquidity.
For better policy guidance, Remolona said the BSP needs to replace the FX swap market with the interbank repo (repurchase) market, noting that banks have been asked to start tapping it.
The interbank repo market is an overnight, secured lending market where banks and financial institutions exchange government securities for cash, agreeing to repurchase them later at a higher price. It functions as a collateralized “plumbing“ system for managing short-term liquidity, price-making in fixed income, and executing monetary policy.
Considered the standard short-term market worldwide, it has grown from almost nothing to about P100 billion in transactions, Remolona said, since the signing more than a year ago of the Global Master Repurchase Agreement (GMRA) published by the International Capital Market Association to govern repo transactions.
“I think it won’t be long before it makes the FX swap market redundant, no longer necessary,“ he pointed out.
The BSP in November 2024 introduced the interest rate swap (IRS), which Remolona said is a better instrument for hedging and arbitrage in the bond market.
IRS transactions have so far reached P30 billion, with maturity time getting longer, he added, saying, “it’s not a hard task because the existing makeshift markets were not so good,” and that banks would soon shift to the IRS since “it’s easy to use.”
Inclusion in the JP Morgan Emerging Bonds Index would also help with liquidity, Remolona said.
As of Sept. 12, 2025, JPMorgan said Philippine peso-denominated government bonds (RPGB) have been tagged as “Index Watch Positive,” the final review phase for the bonds’ potential inclusion in the Government Bond Index for Emerging Markets (GBI-EM) series.
