Retail Treasury Bonds – What, Why and How
We will talk about what retail treasury bonds is, why you should consider investing in it and how you can invest for the first time! Is this the first time you heard about Retail Treasury Bonds?
Then you are in for a treat! In this post I will share everything you need to know about Retail Treasury Bonds as an investment vehicle.
If you consider yourself a highly conservative when it comes to investing, meaning you can’t take that much risk of losing your money and would want substantial capital appreciation – Retail Treasury Bonds is the investment for you.
Just make sure the money you will allot is something you don’t need for the next five years.
What are Retail Treasury Bond (RTB)
Retail treasury bonds (RTB) is a type of investment vehicle issued by the Bureau of the Treasury (BoTR) under the Department of Finance. RTBs are made available in order to raise funds to be used by the Philippine government for its plans and projects. RTBs are a proof of debts wherein investors are paid a fixed annual interest rate paid through quarterly coupons.
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How Retail Treasury Bond (RTBs) work
In Retail Treasury Bonds (RTBs), the money you invested will be pooled together with other investors and used as part of the country’s treasury. Your investment will used to finance infrastructure projects, social welfare and education programs, and other government initiative for the public such as healthcare, defense, etc.
You put your money in RTBs for a definite number of years called term and the government pays you interest quarterly or every 3 months. At the end of the term, you get the amount you invested and the last payment of interest subject to 20% withholding tax.
How much you can earn in Retail Treasury Bonds (RTBs)
Investing in RTBs, unlike individual stocks or mutual funds, will give you a guaranteed annual interest rate upfront.
Thus, computing for how much you can earn in this investment vehicle is easier. Other factors involved in the computation is the number of years or terms and the 20% withholding tax.
Here are the given:
Starting money you will invest – Php 50,000
Number of Years or Terms – 5 years
Annual Interest Rate – 2.625%
For the Quarterly Coupons or interest income you will receive every three months: Annual Interest Rate / 4
Quarterly Coupon is 0.65625% or Php 328.125 every quarter. How did we get the Php 328.125? Simply multiply the quarterly coupon to the starting money you will invest.
Now this is not the final money you will earn every quarter. We still need to take into consideration the withholding tax of 20%.
How it will be commuted is first, you multiply the quarterly coupon to 20%. For this given example, the answer will be Php 65.625.
Then subtract the product to the first quarterly coupon computed. That’s Php 328.125 minus Php 65.625. The difference will be Php 262.50.
This means, every quarter you are earning Php 262.50 passive money from your initial investment.
How much will you earn after five years or upon maturity of your RTB?
The formula is pretty simple – (Php 262.50 x 4 quarters in a year)
Year 1, you earn Php 1,050
Year 2, you earn another Php 1,050
Year 3, you earn another Php 1,050
Year 4, you earn another Php 1,050
Year 5, you earn another Php 1,050
Total earning at the end of the 5-Year Retail Treasury Bond term is Php 5,250.
Your starting money will now become Php Php 55,250.00.
Bureau of Treasury provided a quick link where you can compute for your earnings easily. Just visit this link – https://www.treasury.gov.ph/rtb/
Features and Benefits of Retail Treasury Bonds
1. Affordable. You can start for just Php 5000
2. Low-risk investment Higher interest rates compared to other financial instruments such as savings accounts and time deposits
3. Can be easily bought or sold in the secondary market through SEC-licensed Fixed Income Salesmen like banks.
4. Interest payments are credited either quarterly to your account.
5. Interest earned is guaranteed by the Republic of the Philippines regardless of price fluctuation during the life span of the bond
About RTB24 Ahon Pilipinas Progreso Bonds Para sa Bayan
The RTB24 Ahon Pilipinas Progreso Bonds Para sa Bayan is the current RTB release of Bureau of Treasury.
The proceeds from RTB 24 will finance the government’s various expenditures focused on:
- Supporting sectors most affected by the COVID-19 pandemic (i.e., the unemployed, MSMEs, and the country’s healthcare system)
- Construction of Infrastructure projects
- Refinancing of existing debt
- Other national expenditures, focused more on the country’s efforts against the pandemic
How to Invest in RTB24 Ahon Pilipinas Progreso Bonds Para sa Bayan
Bureau of Treasury provided a number of ways you can start investing in Retail Treasury Bonds.
Option 1. Over the Counter
Step 1. Investors will be required to open a peso account or designate an existing peso account with the Selling Agent where interest and principal payments will be made.
Step 2. Investors must submit to the Selling Agent the requirements for purchasing the RTBs (i.e. Application to Purchase, Client Information Sheet, etc.).
Step 3. Investors must pay the Selling Agent the amount due for the RTB purchase and applicable bank fees.
Step 4. At the time of purchase of the RTBs, the Selling Agent will issue an Acknowledgement Receipt/ Official Receipt.
Step 5. Investors will receive a Confirmation Advice to be issued by the Selling Agent a few days after the Issue Date.
Option 2. Online Ordering Facility
Step 1. Log on to www.treasury.gov.ph and read through the details of the investment.
Step 2. Accomplish the Ordering Form, select a Settlement Bank (Must be either China Bank, DBP, FirstMetroSec or LANDBANK) and agree to the terms and conditions.
Step 3. Log on to the chosen Settlement Bank’s Online Payment Facility to pay for the principal cost.
Step 4. A notice of successful payment may be printed as your proof of investment in the RTBs and a system generated notice of successful payment shall be sent to your email address designated upon opening of a peso deposit account with the Settlement Bank or sent via SMS.
Option 3. Bonds.PH Mobile App
Step 1. Download the Bonds.PH app on the App Store (for iOS devices) or Google Play Store (for Android devices).
Step 2. Open the app and create an account.
Step 3. Verify your email address and mobile number.
Step 4. Log in and verify your account by submitting the required document and information.
Step 5. Once your account is verified, cash in to add funds to your account.
Step 6. Purchase RTB 24 during the Public Offer Period through the app.
For easier access to the payment methods available just, go to this link – https://www.treasury.gov.ph/rtb/
Read through the content and navigate to the page below:
If you click the Ready to Order Online, you will be redirected to straight to the Order Form where you can choose the bank where the investment money will be coming from.
If you click Ready to Order via Bonds.PH App, you will be prompted to download a dedicated app prepared by BTr for investing in Retail Treasury Bonds. Make sure that if you click Ready to Order Online, your chosen bank account has money already you intend to invest.
Only 4 settlement banks will appear in this link.
If you don’t have any account to any of the banks/broker above, it’s okay. You may still inquire directly to your bank provider. If you can see their logo below, they offer RTBs and you can inquire via their website or they have a dedicated page for RTB order.
Do note that the offer period for the Progreso Bonds is from July 16, 2020 to August 7, 2020 only.
To invest or not to invest in Retail Treasury Bonds
Here are a number of reasons why Retail Treasury Bonds (RTBs) can be right for you:
1. Retail Treasury Bonds (RTBs) are almost risk free investment
Because Retail Treasury Bonds (RTBs) are direct, unconditional and general obligations of the Republic of the Philippines, your investments are considered as an almost risk free! Your principal investment, at least, is guaranteed safe and backed by the government.
2. Retail Treasury Bonds (RTBs) provide fixed interest rate
If you are looking for an investment vehicle that you know exactly how much you can earn from the get go, then this is for you. It’s considered a fixed income security, which means that you earn a fixed interest rate based on the principal market given on a quarterly basis.
3. Retail Treasury Bonds (RTBs) have higher interest rate compared to regular savings account and time deposit
At 2.625% for the current RTBs available, this is still a competitive return compared to saving your money in a regular savings account or time deposit. And with the current market condition due to the pandemic, conservative investments such as RTBs are considered gold mine compared to equities.
The only con for Retail Treasury Bonds (RTBs) is the term or the number of years you need to stay invested. Also, as it is a low risk investment, the returns may not be as high compared to investing individually in the best stocks.
Progreso Bonds, the current RTB available has longer term (5 years) and lower interest yield (2.625%) compared to the last RTBs issued by Bureau of Treasury. You may opt to wait for other RTBs to released by the government for the public or invest now.
Final Notes from SavingsPinay
I hope this post helps you understand what Retail Treasury Bonds (RTBs) is about.
Remember to check your risk- appetite first. RTBs are mostly for conservative investors who want guaranteed capital appreciation.
Because this is backed by the government, your investment is at lowest-risk.
If you have a big amount of money you don’t need for the next 5 years, and you just want it to work for you without touching it or adding to it anymore, this is a good investment. You simply put the money and wait for the interest payments paid quarterly.
Do note that this is still subject to 20% withholding tax unlike mutual funds.
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Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at www.izzaglinofull.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at email@example.com