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.

image

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

  1. Paul May 8, 2010 at 10:03 pm #

    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. Allan @ Rich Money Habits May 9, 2010 at 5:09 pm #

    @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. lhoy June 6, 2010 at 11:59 am #

    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!

    • akosiallan June 10, 2010 at 11:23 pm #

      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. Jay August 2, 2010 at 12:34 pm #

    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. Tim August 2, 2010 at 5:16 pm #

    Hi Allan! I’m bookmarking this post! Something got me fired up with this post! I’m also adding a few blessings. 🙂

  6. Joamer August 3, 2010 at 2:54 pm #

    Regarding the RTB’s may I ask your initial investment was it also Php 5000

  7. Joamer August 3, 2010 at 2:56 pm #

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

  8. Allan @ Rich Money Habits August 3, 2010 at 6:34 pm #

    @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.

  9. abie August 5, 2010 at 9:12 pm #

    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.

  10. Allan @ Rich Money Habits August 6, 2010 at 1:20 am #

    @abie, you’re welcome! Great to have you here at RMH! God bless.

  11. VJ August 16, 2010 at 9:03 pm #

    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!

  12. VJ August 16, 2010 at 9:05 pm #

    I’ll bookmark this, sobrang informative pala nito.
    Thanks, God bless!

  13. Allan @ Rich Money Habits August 17, 2010 at 11:37 pm #

    @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!

  14. VJ August 18, 2010 at 10:14 pm #

    Thanks Allan, I am now reading your other articles..
    I might share some sa FB.

    Regards,

  15. gladie de roxas November 9, 2010 at 3:12 am #

    hi if i have 10million to put in bonds how much interets i can get in 10 years term?

    • akosiallan November 27, 2010 at 3:24 pm #

      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. 🙂

    • akosiallan January 18, 2011 at 12:01 am #

      Right now, I think the 20 year tenor bonds are fetching at around 8%…So if it’s 10 years, it could be lower than that.

  16. gladie de roxas November 9, 2010 at 3:13 am #

    IM INTERESTED OF BUYING TREASURY BONDS SINCE I START READING COLAYCO’S BOOK.

  17. Lianne August 18, 2011 at 2:40 pm #

    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.

    • akosiallan August 20, 2011 at 4:26 am #

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

  18. gladie de roxas September 19, 2011 at 6:09 pm #

    where can i buy treasury bills direct? pls reply!

  19. Nodols October 19, 2011 at 12:22 pm #

    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 ” ?

    • akosiallan October 23, 2011 at 9:37 am #

      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.

  20. Esme December 19, 2011 at 2:21 am #

    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.

  21. Vivian March 3, 2012 at 10:22 pm #

    hi allan, can you differentiate treasury bonds between treasury bills?

    • akosiallan March 10, 2012 at 2:23 am #

      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.

  22. gladie de roxas May 1, 2012 at 6:51 pm #

    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.

  23. daisy mae jopillo May 13, 2012 at 4:26 am #

    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?

    • akosiallan May 24, 2012 at 4:11 am #

      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. 🙂

  24. Vin September 12, 2012 at 1:22 pm #

    Hi Allan,

    A blessed day to you!

    Which is better to invest mutual funds or treasury bonds?

    Thank you!

    Vin

    • akosiallan September 30, 2012 at 11:11 pm #

      depends on your financial goal. main difference is treasury bonds don’t compound.

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