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Derivatives

Philippines Local-Currency Structures Gain Ground

Philippine peso-linked derivative products are gaining momentum on the back of greater local user sophistication and improving domestic economic conditions.

Philippine peso-linked derivative products are gaining momentum on the back of greater local user sophistication and improving domestic economic conditions. "Clients are looking for yields and are now a lot less hesitant to pull the trigger," said a derivatives head at an international house in Manila. He explained growing liquidity in the nascent onshore rates market, which kicked off in late 2003, and increasing sophistication has prompted houses with onshore derivative licensing to begin to push out local-currency products to such clients as insurers or high-net-worth individuals.

Previously such clients invested in vanilla peso products or in some cases in G-3 structured notes. Now, with increased activity on the back of a firming economic outlook and expected ratings upgrades for the country, products such as range accruals and fx or interest-rate option-linked notes are begging to emerge in pesos. "The level of sophistication has undoubtedly improved," said the derivatives head.

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