The Philippine government is selling three-year Retail Treasury Bonds (RTBs) that will pay an annual interest rate of 4.25 percent in a bid to encourage regular bank depositors to diversify to higher-yielding investment instruments with a longer holding period.
For a minimum of Php5,000, Philippine residents with a bank account can buy the RTBs and effectively lend money for three years to the government, which will pay the annual interest in quarterly installments between April 2017 and April 2020. After three years, the government will return the principal to the RTB holder.
According to the Bureau of Treasury, the first step for interested investors is to inquire at your bank of choice if they are offering the RTBs. If the bank offers the bonds, the next step is to accomplish the necessary forms, provide the other required documents and have the documents notarized.
The payment for the bonds is rather easy because it will be automatically deducted from your bank account. Similarly, the quarterly interest earnings for the bonds will also be automatically credited to your bank account. Those without deposit accounts must first open one with the bank of their choice.
Interested investors have only until April 6, 2017 to buy the RTBs, according to the Bureau of Treasury, which began offering the bonds last March 28. Investor interest in the RTBs is quite high. Banks who participated in the auction to set the bond’s coupon rate last March 28 offered to buy up to Php70 billion of the bonds, more than double the Php30 billion initially set by the government. The banks are reselling the bonds to the public.
The government regularly sells bonds to raise money to finance its operations and infrastructure projects, but the ongoing RTB offering is special because it was designed to appeal to small individual savers and encourage them to start investing in long-term instruments.
“We want more Filipinos to get into the habit of investing, and become more financially aware of how their money could work harder for them,” National Treasurer Rosalia de Leon said in a statement.
The new three-year RTB's coupon of 4.25 percent rate is higher than 3.5-percent yield on the first RTBs offered under the Duterte administration in September 2016, which had a longer maturity of 10 years or until September 2026.
The new RTB also pays more than the average rate of 3.12 percent for time deposits of more than one year in February,based on data from the Bangko Sentral ng Pilipinas. Some corporate bonds with a three-year tenor also pay a coupon rate of only four percent, according to data from the Philippine Dealing System. Many corporate bonds also require higher minimum investment placements of at least Php50,000 and pay interest only twice a year.
First Metro Investment Corp. and Land Bank of the Philippines serve as the joint lead issue managers for this round of RTBs. BDO Capital & Investment Corp., BPI Capital Corp., Development Bank of the Philippines, China Bank Capital Corp. and SB Capital Corp. are the joint issue managers.
The RTBs will be available through any of the 17 qualified selling agents: BDO Universal Bank, BDO Capital & Investment Corp., BPI Capital Corp., China Banking Corp., Citibank, CTBC Bank (Philippines) Corp., Development Bank of the Philippines, First Metro Investment Corp., ING Bank, Land Bank of the Philippines, Metropolitan Bank and Trust Co., Philippine Bank of Communications, Philippine National Bank, Rizal Commercial Banking Corp., Security Bank Corp., Standard Chartered Bank and United Coconut Planters Bank.
Elyssa Christine Lopez is a staff writer of Entrepreneur.com.ph. Follow her on Twitter @elyssalopz