How to invest in Retail Treasury Bonds (RTB)


I was visiting various banks yesterday scouting for a good housing loan package when I chanced upon an announcement at the Development Bank of the Philippines (DBP) in Buendia, Makati about the government offering of Retail Treasury Bonds.

What are Retail Treasury Bonds?

The Philippine Retail Treasury Bond (RTB) is a direct and unconditional obligation of the Philippine government generally considered a safe and liquid investment opportunity. The RTB, issued by the Bureau of Treasury (hence the name), is one way for the government to raise needed funds.

It is safe because it is fully backed by the government and rarely does a government, including the Philippines, defaults on a debt security such as this. It is liquid because it can be traded in the secondary market prior to maturity.

It is called Retail because at Php5,000 (US$112) minimum investment, even individuals can invest here.


* Want to learn more about investing in Philippine RTB? Here are UPDATED articles!


How to compute interest earnings in RTBs

The coupon interest on the 3-year bond issued back in 2008 was 8.50% per annum and for the 5-year bond, 9.0%.

Interest is paid every quarter so you’ll receive four interest payments every year.

It is, however, subject to 20% withholding tax. Meaning, given the following investment, the actual return would be:

  • Investment Amount: Php50,000
  • Invested in: 3-year RTB paying 8.50% coupon
  • Gross Quarterly Interest: Php1,062.50 (Php50,000 x 8.50% x 1/4)
  • 20% Withholding Tax: Php212.50
  • Net Interest to be Received: Php850.00 every quarter

A Php50,000 investment in the 3-year bond yields a net quarterly interest of Php850.00. Since this is paid every quarter, the total interest receivable during the year is Php3,400 (Php850.00 x 4) which represents a net return of 6.80%.

For the 5-year RTB:

  • Investment Amount: Php50,000
  • Invested in: 5-year RTB paying 9.00% coupon
  • Gross Quarterly Interest: Php1,125.00 (Php50,000 x 9.00% x 1/4)
  • 20% Withholding Tax: Php225.00
  • Net Interest to be Received: Php900.00 every quarter

Investing Php50,000 in the 5-year bond earns a net quarterly interest of Php900.00. The total interest for 1 year is Php3,600 (Php900.00 x 4) which represents a net return of 7.20%.

The returns are not that bad considering that this opportunity is virtually risk-free.

The requirements to make a placement in RTBs are:

  • (1) a DBP savings account (the bank account where the quarterly interest will be credited);
  • (2) an Investor’s Undertaking Form (provided by DBP);
  • (3) a Special Power of Attorney form (also provided by DBP);
  • (3) a valid ID; and, of course
  • (4) the money (minimum Php5,000; increments of Php5,000).

The bad thing, though, is that despite the original deadline, the government is thinking of cutting the offering period short supposedly because they have raised enough money already.

* Here are UPDATED articles about investing in Philippine RTBs!


34 thoughts on “How to invest in Retail Treasury Bonds (RTB)”

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  2. hi i just want to ask.. if someone knows a website where we can get daily updates of government bonds, including its daily, weekly and monthly updates for these countries,. please email me — naive_gascon@yahoo.com… thank you thank you

    China,Indonesia

    Japan

    Korea

    Malaysia

    Philippines

    Singapore

    Thailand

    India

    Hong Kong

    Australia

     

    United States 

     

    Greece 

    Portugal

    Ireland

    Italy

    Spain

    Belgium

    France

    Austria

    UK

    Norway

    Finland

    Netherland

    Denmark

    Sweden

    Germany

    Switzerland

  3. Eliseo S. Encarnacion

    Where can I go to invest in the government’s retail treasury bonds.
    Commercial and savings banks do not seem to know about it.

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