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MANILA (Reuters) - The Philippine central bank announced the launch on Monday of an interest rate swaps market anchored to a newly established benchmark rate to enhance bond market trading and liquidity.

The start of IRS transactions follows the recognition by the International Swaps and Derivatives Association of the benchmark - the overnight reference rate (ORR) - which the Bankers Association of the Philippines helped establish.

IRS, a fixture of developed fixed-income markets, lets parties manage rate risk or bet on the direction of borrowing costs by exchanging fixed and floating interest rate streams.

The ORR, to be based on the central bank's daily reverse repurchase auctions, is expected to provide a better benchmark for pricing loans, now based on yields from thinly traded government securities.

"We are excited for PESO IRS to go live to help boost transactions, create a benchmark yield curve, and deepen our capital markets," central bank Governor Eli Remolona said in a statement. "A benchmark curve will help banks and other lenders price loans at various maturities."

Sixteen banks have committed to be market makers for the ORR-based IRS, ensuring pricing across maturities from one month to 10 years and enhancing interest rate transparency, the central bank said.

Bangko Sentral ng Pilipinas also said it was working on adopting global master repurchase agreement contracts that will allow banks to access treasury bonds for repo transactions to boost the government securities repo market.