What are retail treasury bonds and why should you invest in them?

Just recently, the Bureau of Treasury (BTr) launched Retail Treasury Bonds (RTB) 30, an investment program offering cheap and risk-free government securities to the public.

RTB 30 has a five-year tenor with a gross interest rate of 6.25% per year. Interest payments are given every quarter until the bond’s maturity in 2029.

Existing investors who own government bonds that are maturing on March 9 and 12 can also swap these with RTB 30.

It is the third RTB issued under the administration of President Ferdinand Marcos, Jr. and was expected to raise PHP 30 billion from the new issuance. As of February 13, 2024, the government was so far able to raise PHP 212.7 billion.

But what is a Retail Treasury Bond? Should I trade or invest in them?

What are Retail Treasury Bonds?

Retail treasury bonds are the National Government’s program that allows retail investors (mass market) to invest in government-owned fixed-income securities. While most RTBs offered by the government are in pesos, there have been two bond offerings in US dollars.

The primary goals are for the government to raise funds for national projects and to enable diversification of funds beyond existing resources, such as taxes.

Just like other forms of treasury bonds, the government uses RTBs for daily expenses and infrastructure development, from capital expenditure for education, social services, public works constructure, and military without relying on taxes or budget cuts.

How do RTBs earn?

When you purchase an RTB, you effectively lend money to the government. When the government uses RTB funds to pay for certain projects, those projects are expected to generate income, which it must share with the investors in the form of interest coupons that have an attached monetary value to them.

Coupons are issued to the investors either quarterly, semi-annually or annually. The issuance of coupons continues until the bond matures, which can be at any time from a year to 10 years.

Once the bond matures, the full amount invested is returned to the investors.

Most of the time, a withholding tax of up to 20% is imposed on coupon payments, unless the investor is a tax-exempt institution.

What are the benefits of RTBs to investors?

RTBs often offer higher yields than even time deposits and they provide regular cash flows via quarterly interest payments until the bond’s maturity.

Since their first issuance in 2001, RTBs have been among the most affordable forms of government-backed fixed-income investment instruments. The minimum placement is at PHP 5,000 and can earn the investor much higher yields.

They are also considered low risk as the government is obligated to pay them in full.

Like other bonds, RTBs can be bought and sold in the secondary market through banks or brokers. Their prices change based on supply, demand, and prevailing interest rates.

How to buy Retail Treasury Bonds in the Philippines

Those looking for where to buy retail treasury bonds in the Philippines will be glad to know that these are accessible via online channels and via the branches of the selling agent banks nationwide. For online purchases, you can go to www.treasury.com.ph and look for the available RTB currently on offer, where you will need to complete an order form. After completing the order form, you must choose a settlement bank that is accredited by the Bureau of Treasury.

If you want to invest in the new RTB 30, you can place your order by going to any Metrobank branch near you.

While most of the major domestic banks are included as settlement facilities, other digital platforms, both mobile and on desktop, can also accommodate purchases of RTBs. First Metro Securities, Inc. offers Metrobank Retail Treasury Bonds so investors can begin from the comfort of their own homes.

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ALEXANDER VILLAFANIA is a writer for Metrobank’s Wealth Insights. For almost 20 years, he authored stories on science, technology, and education as a journalist for several local news organizations. He has since transitioned to writing more about financial literacy, believing that helping people develop a healthy relationship with money is key to enabling positive socio-economic and environmental change.