By Melissa Luz T. Lopez
Senior Reporter
BOND TRADERS are looking to revive the local repurchase market at a time of tighter liquidity, as the platform has seen little action in recent months with banks still reluctant to lend cash.
Christopher Ma. Carmelo Y. Salazar, president of the Money Market Association of the Philippines, Inc., said industry players want to revive the repo market to deepen local debt markets further as it failed to gain traction one year into its opening.
“I think for the repo, we’re looking at reviving that because the market has sort of dried up. It had a lot of promise and potential last year, but in the recent months volume has been zero,” Mr. Salazar said during a roundtable session last week.
The Bangko Sentral ng Pilipinas, the Bureau of the Treasury and the Securities and Exchange Commission set up the repo market in November 2017 to allow banks to buy and sell securities.
Under a repo agreement, one party trades peso-denominated debt papers such as Treasury bills and bonds to another dealer with the promise to buy these back at a specified price and a future date. In the process, the seller gets hold of short-term cash to hand out fresh loans and service client withdrawals, among other uses.
This allows them to do away with raising fresh funds by issuing new debt notes or credit lines, as these would often fetch higher interest rates.
“Given the generally tight liquidity in the market, a lot of the participants tend to be on the same side — you’re borrowing pesos. If you’re all on the same side, no one really wants to lend so you can’t execute a deal,” Mr. Salazar added.
MART vice president Steven Michael T. Reyes added that a major constraint for repo transactions is the tedious process of striking a deal between two banks, as captured by a global master repurchase agreement (GMRA). Firms have to execute separate deals for each bank they want to do a repo with, noting that a standard document for all agreements has not prospered.
“Basically, it’s my institution looking at your institution from a credit perspective. If you’re the biggest bank and I’m dealing with another which is a below-top 10 bank, it’s different,” Mr. Reyes said, noting that all repo arrangements are “bilateral.”
Mr. Salazar also noted some confusion in terms of short-selling securities, which may have discouraged banks from entering into contracts.

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