Previously mentioned that we are including Retail Treasury Bonds (RTBs) in our investment options for the year.
Whoah big words! Nosebleed!
In very simple terms: the government wants to borrow funds from you at a fixed interest rate for the medium term. That’s it!
Let’s get into more details.
- These are issued by the Phillippine government via Bureau of Treasury so it is safe and almost risk-free, unless of course the PH government goes bankrupt (but before that they can print money to repay you)
- It belongs to the fixed-income securities and money markets funds, which you might have already heard of.
- It comes in various terms such as 3, 5, 7, 10 years from original issue date
- Interest rate is set upon issue, the latest one issued in Jan 2016 carries 3.625% rate, subject to 20% witholding tax (so net rate is 2.92%). Still better than time deposits.
- For 2015 the interest rate of issuances ranged from 2% to high 3% but way back in 2009 to 2011, rates even ranged from 5% to 9% per year
- One may avail by inquiring though most Philippine banks; it is liquid you can sell at a secondary market it if you need the money
- Every issuance, the government has a fixed target amount they want to borrow so these RTBs can run out fast as soon as the government hits its target amount
- Usual minimum investment: PHP100,000. What?
That’s the rub. It’s called retail treasury bonds so that supposedly retail investors may partake. But at the minimum investment of PHP100,000 (some banks even require PHP200K to PHP500K), it’s much faster to start investing in stocks and UITF than this one (in terms of minimum investment required).
At such a high cut-off, it already deprives many retail investors of being able to invest in a low risk but slightly higher returns — which could have been a great non-traumatic start for newbies. A classic case of richer people having more investment options while those who have less are stuck with riskier options.