Manila, Philippines

Where Did The Php5K Retail Treasury Bonds (RTB) Go?

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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!

I bet you this is more easy to comprehend than stocks and UITF but not so popular. It’s some sort of high-yield deposit but much higher compared to banks’ time deposits.

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.

Did a quick browse in Google as well, old blog posts (2008 to 2010) also mentioned a PHP5K minimum investment with DBP. My charitable Ilocana called DBP to inquire but they also said minimum is now PHP100,000. So entry rate used to be PHP5K, now it’s PHP100K. Sad.
My personal theory is that similar to increased minimum investment in SDA, there’s not much need for government borrowing right now so regulators would rather have the money out of the markets and used for spending to further spur the economy. Back in 2008, global financial recession, RTB rates were much higher so I guess it was the government wanting to lure in many funds for their use. Though it’s quite counter-intuitive since as equities plunge, funds will really go to safer havens such as bonds and fixed-income securities so no need to attract them with higher rates.
Maybe the government just really doesn’t need our money, especially now that PH is already at investment grade, so they have more options now.
Still, we’re keeping this as part of our investment options.
So where did the PHP5K RTB’s go? We don’t know. In case you find them, please let us know!

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