Retail treasury bonds or RTB is another type of investments we can venture here in the Philippines. This type of investment is “virtually” risk-free. It is considered zero-risk because it is a direct, unconditional and general obligation of the Republic of the Philippines.
The yield is assured if the investor holds on to the bond until maturity, otherwise it will be subject to interest rate risk depending on the prevailing market rate at the time the RTBs are sold in the secondary market.
In this short article, I will share basic and fundamental information about retail treasury bonds. Here we go.
What is Retail Treasury Bonds (“RTBs”)?
The Retail Treasury Bonds (“RTBs“) form part of the National Government’s program to make government securities available to retail and individual investors.
Retail Treasury Bonds Features
- earns fixed interest rate
- interest rate is based on prevailing market rate
- interest paid every three months during the term of the bond
- placement targeted at retail and individual level
- Interest income on retail treasury bonds or RTBs is subject to the 20% final withholding tax
During the Public Offering Period, RTBs will be made available by the Bureau of the Treasury (“BTr“) through the Selling Agents to the following: Individuals, Corporations, Financial Institutions and other Institutional Investors.
Benefits of Retail treasury bonds
- zero-risk. They are direct, unconditional and general obligations of the Republic of the Philippines (“ROP“).
- higher-yielding. Interest rate is superior to other investments.
- They are available for as low as P5,000 investment (during the Public Offering).
- Pay frequent cash flows. Interest payments will be made quarterly.
- Liquid. They can easily be bought and sold in the secondary market through the Selling Agents subject to minimum requirements and market rates.
Who can purchase the retail treasury bonds or RTBs?
The RTBs aim to cater to retail investors such as individuals and corporations who are looking for a zero-risk, accessible and higher-yielding investment alternative for their savings. The minimum denomination is only P5,000 and in multiples of P5,000 thereafter.
When and where can an investor purchase retail treasury bonds?
The RTBs will be sold to the public during the Offer Period which is scheduled by the Bureau of Treasury. There will be designated period given to the public to subscribe to the RTBs through the Selling Agents.
Since only a limited amount of RTBs will be issued, the BTr has the option to shorten the Offer Period. The terms and conditions applicable to the RTBs as well as copies of the complete documentation will be made available by each of the Selling Agents during the Public Offering (PO).
After the Offer Period investors may still purchase the RTBs in the secondary market at prevailing market rates.
Here’s the latest public offering of treasury bonds taken from treasury.gov.ph.
How does an investor participate in the Public Offering?
Investors may purchase the retail treasury bonds or RTBs over the counter from the Selling Agents, subject to the documentary and minimum investment requirements of each Selling Agent. Payment procedures for investments in RTBs may vary per Selling Agent.
Investors will be required to open a peso deposit account or designate an existing peso account where interest and principal payments of the RTBs will be credited.
Here is the list of government eligible dealers (GSEDs) as of April 5, 2014.
Please take note that the list of GSEDs above do not always participate or may not participate in auction during the public offering. For latest and updated information, please visit the official website of treasury.gov.ph here. All these information are also taken from treasury.gov.ph official website.
Investing in retail treasury bonds is one good option for people who do not want risks and volatility. Since the government is the last entity that can be into bankcruptcy, retail treasury bonds provides virtually zero-risks for investors.
If you’re a conservative type of investor who is looking for an investment that can give you higher returns than a normal savings account or time deposits, investing in retail treasury bonds might be for you.
Data Source: treasury.gov.ph