Guide to Investing in Retail Treasury Bonds (RTB) in the Philippines
Have you heard about RTB investments in the Philippines? These are Retail Treasury Bonds (RTB) offered by the government of the Philippines.
Did you know that you can invest for as low as P5,000? Find out more details in this handy and easy-to-read guide below.
What are Retail Treasury Bonds?
Retail Treasury Bonds or RTBs are debt obligations of a government used to raise funds. They are fixed-income instruments, meaning they pay a fixed interest rate per annum. Unlike stocks or other perpetual assets, RTBs have a predetermined maturity date. On this maturity date, the principal (plus any accrued interest) will be paid back to the investor.
Why are they called “Retail Treasury Bonds”?
RTBs are called “retail” because they cater to the retail market, that is, the market for individual or small investors. The minimum amount needed to invest in RTBs is a mere five thousand pesos (P5,000), which makes it easy for a retail investor to buy such bonds. This is in contrast with the institutional market or the market for large investors where one transaction may already run in the millions of pesos.
RTBs are named “Treasury” because they are issued by the Philippine Bureau of Treasury, the government unit in charge of issuing and administering government securities.
As an investment asset, RTBs are “bonds” because they pay a fixed amount of interest every year and they have a set future maturity date.
Are RTBs safe investment?
Since RTBs are issuances of the the Philippine government, it is generally considered a safe and liquid investment opportunity.
Of course, it still carries some amount of sovereign risk or the risk the Philippines would default on its loan obligations, but this risk is considered relatively low. Because the risk is low, the return is also low, as seen in the interest rate of current RTB issuances which range from 3-5%. This pales in comparison with the possible earnings one can get from stocks, corporate bonds, mutual funds, or UITFs, among others.
But then again, in those assets, loss of capital is a possibility. In the case of RTBs, rarely will the Philippine default on its loans, thus the possibility of loss of capital is low.
How do I make money in RTBs?
Investors get to earn from the interest paid by the RTBs. A sample computation of RTB’s interest earnings can be found in the article How to invest in Philippine RTB?
Can I sell my RTBs prior to maturity date?
Yes, Retail Treasury Bonds are marketable securities, which means investors can endorse it to another retail investor or sell it back to the Selling Agent, usually the banks or financial institutions that sold bonds to the individual.
Finally, how do I invest in RTBs?
Interested investors simply have to approach their bank to inquire about the Philippine RTBs. If the branches are unaware of this instrument, you might want to be connected directly to the Trust Department or Asset Management Group of your bank.
However, despite the P5,000 investment amount for each RTB paper, most banks require a higher placement amount such as P100,000 or P1 million. Get all the details you need before you decide to invest in RTBs.
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