Chapter 2 Flashcards
there are number of available debt instruments in the country with various ?
issuers
maturity
size
coupon
minimum denominations
are domestic government debt issued regularly to finance the national government needs for capital
treasury bills
are another form of government debt issued and launched in the late 1990s to attract retail investors
Small investors program bills
are short-term debt notes used in times of tight liquidity and interest rate volatility
Cash management bills
overnight placements in the inter-bank call loan market as a short-term outlet for excess liquidity of banks
Reverse repurchase agreements
This is BSP’s principal tool in its open market operations to control liquidity in the financial system.
Reverse repurchase agreements
are unsecured debt instruments issued by resident corporations which state the terms and conditions of the borrowing.
Short-term commercial papers
are short-term debt obligations issued by large commercial banks.
Bankers’ acceptance
Available Money Market Instruments
treasury bills
small investors program bills
Cash management bills
Reverse repurchase agreements
Short-term commercial papers
Bankers’ acceptance
Promissory Notes
is dominated by government debt issued regularly.
domestic money market
is a major investor in money market.
Banking sector
Other major players/investors in the money market
Social Security System
Government Services Insurance System
Home Development Mutual Fund
Trust funds
insurance companies
private pension funds
mutual funds
retail investors
are like treasury bills but longer in tenor.
Treasury Bonds
are direct unconditional obligation of the Philippine government, like treasury bonds, but shorter in tenor, usually 2 -7 years.
Fixed Rate notes
were launched in the late 1990s to attract retail investors. Basically, the government is issuing these instruments with similar characteristics as the regular auctioned instruments.
Small Investors Program bonds
are the most common form of corporate borrowings issued by resident corporations.
Long Term Commercial Papers
are a pool of homogenous assets that are securitized
Asset Backed Securities
Example of asset backed securities
Credit card receivables
mortgages
personal loans
are debts of Local Government Units undertaken to finance local government projects.
Municipal Bonds
are intended to beef-up the bank’s capital structure in order to comply with the BSP’s capital adequacy ratio.
Tier 2 Capital notes of banks
are dollar denominated obligations of the Republic of the Philippines and other private companies.
Dollar-linked Notes
Capital Market Debt Instruments
Treasury Bonds
Fixed Rate notes
Small investors program bonds
Long term Commercial Papers
Asset backed securities
Municipal Bonds
Tier 2 Capital notes of banks
the largest issuer of debt in the country.
Philippine Government
the government assumed or guaranteed part of the debt issued by a number of
Government Owned and Controlled Corporation
issuers of private debts are limited to
top domestic companies
comprised the bulk of private issuances
Asset-backed securities
is a major investor in domestic debt instruments.
The banking sector
other major players/investors in the philippine debt market
SSS, GSIS, HDMF, Trust funds, Insurance Companies, Private Pension Funds, and Retail Investors.
the country’s first centralized electronic infrastructure for trading of fixed-income securities
Fixed income Exchange
is a comprehensive financial market infrastructure that aims to provide and electronic platform for trading,
Fixed Income Exchange
what does FIE aims to provide
electronic platform for trading, clearing, and settlement, and depository
Most of the issues traded in the Philippine Stock Exchange
shares of common stocks
preferred stocks
warrants & Philippine Depository Receipts
otherwise known as Ordinary shares
Common stocks
represent ownership in a company,
Common Stocks
Common shareholders are entitled to
Voting rights
Pro rata division of profits among stockholders
also known as “Preferential Shares
Preferred stocks
given preference over common shares
Preferential shares
usually carries a specific rate of return and a specified redemption price.
Preferred
can be converted into common shares at a specified time and price in the future.
Convertible shares
issuers of the Philippine equities market
Financial issues
Services issues
Holding firms issues
Industrial issues
Property issues
Mining & Oil issues
Preferred
Warrants, Philippine Deposit Receipts
this sector includes banks and other financial institutions
Financial issues
this sector includes electricity, power and water
Industrial issues
this sector includes companies such as Ayala Corporation, JG Summit Holdings
Holding firms issues
this sector includes land developers, and real estate companies.
Property issues
this sector includes media; telecommunications; information technology
Services issues
examples include PLDT 10% Cumulative convertible Preferred Series; Ayala Corporation
Preferred
represent the bulk of the foreign exchange transaction.
Spot transactions
the most common foreign exchange transactions are done in the spot market.
Spot transactions
a commitment to buy one currency (peso) against another currency (US Dollar) at a future date at a pre-determined foreign exchange rate.
Foreign Exchange Forward Contracts
is an agreement between two or more parties, where the cash flows are exchanged in two different currencies based on an agreed notional amount and maturity.
Swap Contracts
provides a platform for the buyers and the sellers (banks) to meet with the provision of real time weighted average rate and volume of trades for the peso
Philippine Dealing System (PDS
What are the available derivatives instruments
Forward contracts
Swap Contracts
Option Contracts
these are contracts, which obligate the holder to buy or sell an asset at a predetermined delivery price at a predetermined future date.
Forward Contracts
these contracts specify a simultaneous exchange in cash flows by both parties based on movements linked to the prices, values, or returns of an underlying asset instruments
Swap contracts
is a right but not an obligation to buy or sell an underlying asset at a certain date and price.
Option Contracts
otherwise known as the Real Estate Investment Trust Act (REIT)
RA9856
establishes the framework for a more secure investment in real estate assets.
Real estate investment Trust Act
otherwise known as the Credit Information System Act
RA 9510
otherwise known as the Personal Equity Retirement Account Act (PERAA)
RA 9505
two types of common shares
Class A shares
Class B shares
Give Equity observations on the philippine capital Market
Weak corporate governance
Limited institutional participation
Lack of financial information / regulation
Low demand for securities
limited number of securities traded
Trading concentrated on few issues
Give Debt observations on the philippine capital Market
Huge government debts
Transparency in rate determination
Limited Rating Appeal
Importance of Bank
