The Philippine interest rates are interest rates primarily based on the following:

• a. Interbank Call Loan (IBCL) rates
  or the borrowing and lending rates between and among banks
• b. Bangko Sentral ng Pilipinas (BSP) rates
  which are the borrowing and lending facilities of the central bank to the banks through its Interest Rate Corridor (IRC). The IRC implemented by the BSP covers the Overnight Lending Facility (OLF), Overnight Deposit Facility (ODF), Time Deposit Facility (TDF) and Reverse Repurchase (RRP).
• c. Government Securities (GS)
  wherein the interest rates are based on the rate at which the National Government is willing to pay when they borrow from the local market through the issuance of GS. The market where the Bureau of the Treasury conducts its auction is referred to as the primary market. Only Government Securities Eligible Dealers (GSEDs) are allowed to participate in the primary market.

• There are two kinds of GS:
  • a. Treasury bills
    Treasury Bills are government securities that mature in less than a year. There are three tenors of Treasury Bills: (1) 91-day, (2) 182-day and (3) 364-day Bills. The number of days is based on the universal practice around the world of ensuring that the bills mature on a business day. Treasury Bills are quoted either by their yield rate, which is the discount, or by their price based on 100 points per unit. Treasury Bills that mature in less than 91 days are called Cash Management Bills (e.g. 35-day, 42-day).
  • b. Treasury bonds
    Treasury Bonds are government securities that mature beyond one year. At present there are five maturities of bonds: 2- year; 5 – year; 7 – year; 10 – year and 20-year. These are sold at its face value on origination. The yield is represented by the coupons, expressed as a percentage of the face value on per annum basis, and is payable semi-annually.

These are the rates derived from the trading of GS in the secondary market. The Philippine Dealing and Exchange Corp. (PDEx) is an SEC-licensed self-regulatory organization for fixed income securities. GS transactions that are captured and calculated to form a benchmark are fixed income securities dealt only by authorized PDEx trading participants. These benchmarks are referred to PDS Reference Rates.

These are benchmark rates calculated in compliance with BSP Circular No. 813 with subject Amendment on Market Valuation of Government Securities by the BAP-appointed calculating agent pursuant to BSP Memorandum No. M-2007-006 with subject: Mark-to-Market Valuation of Debt and Equity Securities – Benchmark/Reference Prices.

These PDS Reference Rates are referred to as PDST-R1 and PDST-R2. PDST-R1 reference rates are calculated daily every 11:15AM while PDST-R2 reference rates are calculated daily every 4:15PM.

The published PDS reference rates or benchmarks can be used as basis to compute the lending rate of banks; while private bond issuers, on the other hand, may use these reference rates as the basis for the rates of their corporate issuances.

Derivative is any financial instrument which expresses a contractual relationship between two or more parties whose payment is based on or derived (thus the term “derivative”) from some pre-agreed benchmark or underlying instrument.

Generally, these benchmarks or underliers include foreign exchange rates, interest rates, commodity prices or stock indices.

The IRS is a derivative which allows for a contractual agreement between parties to exchange floating rate debt service for a fixed rate debt service.
PHIREF or the Philippine Interbank Reference Rate is the implied Peso interest rate derived from done deals in the interbank foreign exchange swap market. The PHIREF is used as the benchmark for the reset value for the Peso floating leg of an Interest Rate Swap.

PHIREF or the Philippine Interbank Reference Rate is the implied Peso interest rate derived from done deals in the interbank foreign exchange swap market. The PHIREF is used as the benchmark for the reset value for the peso floating leg of an Interest Rate Swap.