How to Invest in Retail Treasury Bonds in the Philippines – Interests and Fees

Last October, I wrote a story on how my wife and I were able to invest in Retail Treasury Bonds (RTBs) in the Philippines.  We’ve practically forgotten about it until we received a letter from the bank informing us that they have already credited our settlement account with Bank of the Philippine Islands (BPI) Capital Corporation.  We just received our first quarterly interest!  🙂

Here’s a picture of the interest payment we received.

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The net amount is just as we expected.  Our total investment amounted to PhP 200K with a tenor of 7 years at 7% annual interest. This would translate to an annual interest amount of PhP 14K per year or PhP 3,500 per quarter before-tax.  Note that the Gross Amount indicated in the above picture is the same as our computed quarterly interest of PhP 3,500.  This amount is taxed at 20% (or PhP 700) which further reduces it down to PhP 2,800.  This is the net amount after taxes.  This is the amount we expected to receive every quarter for 7 years.  Not very exciting but certainly beats the interest on savings accounts. 🙂

There’s one thing I didn’t expect though — fees.  Included in the letter are 2 debit transactions which I missed in the fine-print.  One is a PhP 7.25 Custody Fee and the other one a PhP 25 Transactional Fee-Security Deposit.

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I’m guessing we were assessed with these 2 fees because we purchased the RTBs from a bank, which is basically, a secondary-market.  Unfortunately, it looks like these two fees will also be deducted every quarter.

In effect, the PhP 2,800 interest is (again) deducted a total of PhP 32.25 fee which brings down the amount we will receive every quarter to PhP 2,767.75.  🙁

Anyone experienced the same thing or know how these two fees are computed?

Things I learned while investing in RTBs:

1) Invest now.

If we waited until we had ALL the answers, we would still be wondering today how to invest in RTBs.  Yes, we were assessed a PhP 32.25 fee that we didn’t expect but the net amount is still better than interest from a savings account or even time deposits. 🙂

2) Read the fine print.

If we’ve read the fine print, we would not have been surprised by these fees.  Yes, it may be tedious to go through every form and double check all information indicated in each form, but a 5-minute checking on the fine-prints can save you time (and money) in the future.

3) Don’t be afraid to fail.

We’ve known RTBs for quite some time, but only decided to invest a few months back.  We were afraid to fail and lose money.  We were content to leave our money sitting idly in the bank via savings or time deposit accounts.  Now, our money is working for us, and making us money – even for only a little amount.  This money is passive income.

I know that the interest amount is small, but imagine if you’ve invested 10x the amount we invested…it would give you a quarterly “passive” income of PhP 28,000 before tax.  That’s around PhP 9,000 every month.  If you can live on that income for a month, then you’re practically free!  (at least for the tenor of the investment:))  That’s money you did not have to work hard for.  That’s money given to you whether you worked at your job or not.  That’s money working for you and setting you free.

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39 thoughts on “How to Invest in Retail Treasury Bonds in the Philippines – Interests and Fees

  1. I read your article and it is very interesting to know that it explains clearly to the investor the procedures on how to invest his/her much valued savings. However, there are certain doubts on my mind which prohibits me from investing in the treasury bond/ bills. My worries are: 1) Is there a possibility that the treasury bonds/ bills will default in their payments to their investors 2) What if the Government collapses? just like our Country whom whenever there is a new elected leader there is always a different policy…what i am saying is if there is a guarantee that the money i have invested will be returned back to me plus its interest, in case of a scenario which i have just cited 3) How does a treasury bond/ bill looks like in the Philippines? i have seen in movies but in actual i really don’t know how it looks like?

    Sorry if i have a lot of questions…I am an OFW and i heard a lot of good news regarding the subject investment instruments. I just want to protect my savings because these are hard earned money and if it will be lost or in case i will be duped, my childrens future and including my retirement will be in jeopardy. I look forward to receiving your response to my inquiries…Paul

  2. @Paul, welcome to Rich Money Habits! The concerns you’ve raised are definitely worth noting and I admire your efforts of protecting your hard earned money. The thing to remember is that everything has a corresponding risk. Even your savings account in the bank is only insured up to the amount prescribed by the PDIC, which is I think around PhP 500,000 in the Philippines. So, in the event the bank collapses, only that amount will be returned to you. Unfortunately, there’s no insurance when it comes to RTBs. So to answer your question, yes you can lose money if the country collapses. In my opinion, knowing how the country is doing financially helps to manage those risks. Good luck on your financial journey!

  3. hi! you said that you i think your broker is from bpi corporation, i would like to know how much is their minimum investment for RTB’s. can i have their contacts sir?
    thanks!

    • Hi lhoy, I’m not sure about the minimum for buying RTBs thru BPI. You can call BPI Capital @ (632) 816-9385 to get this information or find out more details about RTBs. Hope this helps.

  4. Hi Mr Allan!
    May I ask what is the current interest rate (coupon rate)for RTBs? And let us say that I want to buy P100,000 worth of RTBs, how much will I pay if I will buy it from banks (I’m pretty sure it is at a premium)?
    Thanks!
    Btw, your site/blog is very informative/educational..I will bookmark this..More power!

    Jayson

  5. By the way great information and you explain in a very detailed and easy to understand way. Thank you! Bookmarked….

  6. @Jay, I did a quick check under http://www.treasury.gov.ph/govsec/puboffering/offerbond.pdf and saw a Treasury Bond offering @ 7.75% coupon rate for a 10-year tenor tomorrow, Aug 3, 2010. When you buy, your expenses would only be for the notarization of the legal documents which runs P100+?. If you invest P100,000, your quarterly interest income will be assessed about half (P16.125) of what we were assessed (P32.25) since our investment was P200,000. I hope I didn’t confuse you even more. 🙂 Bottomline, the expenses & fees are not really that significant so the interest income still comes out good compared to a time-deposit.

    @Tim, thanks!

    @Joamer, welcome to RMH! Our initial investment was P200,000. The P5,000 minimum for RTBs varies depending on banks. Some accept P5,000 as minimum, others require at least P100,000. Unfortunately, there’s no other way to find it out other than to ask the bank. Hope this helps.

  7. hi allan, ive learned so much from your website, thank you for putting this things up, im an ofw as well and planning to invest
    in t-bonds and stock exchange as soon as i have collected all the information i want to know. thank you. more power.

  8. Very informative. Thanks for sharing Allan.
    BPI just called me and offered a bond before they submit tomorrow. I’m happy coz I thought I can’t join. I also inquired at BDO (office branch) but it’s already closed.
    I’m glad I’m part of this and I hope I didn’t make a wrong move.
    I hope I have that amount as yours but my investment is quite small. Nonetheless atleast I tried. They charged 100 bucks for notary.
    Thank you and I hope many would get to know more of this.
    Ciao!

  9. @VJ, welcome to RMH! That’s great news indeed! Congratulations for taking the action to invest in RTBs! Not many people have the courage to even try investing their own money. I’m sure your small investment is only the start of something big as you go along your investing journey. More power and God bless!

    • lately, the bonds market has been offering minimal interest rates…I didn’t see any offer getting past 10%. maybe it’s because the Philippine economy is performing relatively well given that it managed to grow (albeit very very small) during the recession. It just means that the Gov’t has better capacity to pay the interest and doesn’t have to pay you much for your lending your money. Compare that to the time when there were coup de etat all around the country, I think the interest then jumped up to about 20%. The world of money is weird sometimes. 🙂

  10. Hi kuya Allan. Thanks for the informative post. I was planning to invest my emergency fund in RTBs for about 5 years? Do you think it’s wise or should I stick to savings account instead? Thank you.

    • stick to savings account for the emergency fund. that way, you can withdraw the money right away in case of an emergency.

  11. Hello Mr. Allan,

    I just want to ask, if the bonds that you bought has matured, of course you will have your invested capital back.
    Will your invested capital be taxed again once returned?
    Or are there other charges on the invested capital like the ones you just mentioned above?

    “Custody Fee and Transactional Fee-Security Deposit ” ?

    • Hey Nodols, my bonds haven’t matured yet…good question though. The fact is, I am not really sure if there’s still any other charges. I think, if I am not mistaken, they will simply deposit the principal amount into your account.

  12. Hi Mr. allan. I want to start investing in stocks but i still don’t know how to start. Can you help me give the basic information on how to invest here, how it works? How much is the minimum money you should have to start investing? Thank you and Godbless.

    • i think the difference has to do with how long the term will be. treasury bonds are usually 5, 7 or 10 years. tbills on the other hand are 30, 60, 90 days. hope this helps.

  13. thanks a million po sa reply nyo it’s been a long time na hindi ako naka open ng computer, it’s a big help, god bless.

  14. hi Sir! what if the bank where you bought the tbills went bankrupt? how would you be able to get your ineterst and your capital back?

    • Good question. I am not really sure what will happen, but I will take a guess. My guess is that whatever is in your bank account (ie. quarterly interests from your RTBs), you will still get back, especially if it’s below P500,000 (the amount covered by PDIC). As for the principal, since technically, it is still not yet in your bank account but in the Philippine government’s hands, I guess the government is still legally obliged to give it back to you at the end of the term. But please don’t take my word for it, you can ask the bank before deciding to invest just to be sure. 🙂

  15. The problem with bond is that kailangan mo maging mayaman muna bago ka makapag invest. Unlike stocks na 5k lang pwede ka na mag-start. Kung meron sana na bond to start at 5k then auto re-invest ng interest until you reach a certain target amount.

  16. sir allan,

    kung mag invest ako ng 50K at ang coupon rate is 3.50 per annum at ang interest ay paid Quarterly , so bali ang actual interest quarterly ay 0.875% tama po ba?

    paano ang magiging Computation nito sir? ganito po ba (50K(face value)x 0.875%(coupon rate)-20%(w/tax)=?

    paki expalin naman in deatils kung maari

    salamat po

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