Hi Salve–

Pls explain further how a “good” or “very good” rating depends on the issuer. And what do u think makes a good or superior rating?

In reaction to ur article above, I believe LTNCDs & RTBs serve their purpose well for those who are already on the pay-out or pension phase (retirement) & depend on interest income for their monthly budget. There are a lot of retirees out there who are scouting for a safe investment instrument which could provide them with the highest regular income that is guaranteed. In other words, their investment objectives are preservation of capital & regular income, not capital growth. Their placements were badly hurt when their CTFs where replaced by marked-to-market UITFs & when interest rates of their CTDs declined over the years. And their investible fund is not really that huge to allow them to invest in higher-yielding bonds.

what are the LTNCD rates of BPI and BDO?

for the Tax free part, that is common to all CTD with 5 or more yrs maturity…

I invested last year with PNB’s Tier 2 and i got 10% p.a interest payable quarterly and callable after 5 years (10 yrs term) goodthing it is toppable of 100k if your already an investor of thier Tier ( I think its a subordinate global notes ) downside is 1M yung minimum nila…..

I send my wife to PHILAM Bank Alabang Branch to inquire this product but sold out na raw. Imagine after I read in your paper the nexy day sold out na. What is the use of selling it to the public anyway?
Sana naman pag bibigyan ang mga maliit na investor, Unlike with PNB sila pa ang tumatawag noon sa kanilang clients

angie, i think you know what I’m talking about dearie but thanks for the chance to explain :-). It has to do with the credit rating of the issuer. Generally, the Philippine government (despite its humongous budget deficit) is, within the economy, the one with the highest rating. Banks and corporates vary in terms of soundness, so a thrift bank may, for me, get a “good rating” like AIG Philam because it’s under the umbrella of the AIG group, but still it is a thrift bank. BPI and BDO are both bigger banks with perceived good names. There is a whole spectrum of banks and issuers out there. You won’t catch me putting my money in a rural bank that I haven’t checked thoroughly. Default risk is in the works of very analysis all the time.

RTBs, LTNCDs both have a place in every investor’s portfolio. I remember polling former central bankers on their personal investments and almost all of them bought government securities and bonds. These instruments spread the risks. But if you are looking for a “superior” investment instrument, for me I would rather go for RTBs than LTNCDs. That’s what I meant.

eulem, unfortunately their websites do not indicate the rates for their LTNCDs. I could go into a rant on how much banks are really willing to do to serve their clients online, arggg. Let’s see if we can get the data via their phone banking services…

sorry, that was for honey bunny!

eulem, thanks for sharing your experience. would you rate PNB’s service after you invested in their product?

mart, sorry to hear that. I would feel the same way you do. Maybe institutional investors got a bigger share of the pie. Let’s ask the AIG guys…

Salve,

LTNCDs are worthwhile for individual investors with 500K or more which they “will not” use during the next 5 years + 1 day. I hope the bank sellers stop talking about option to sell prior to maturity date unless they can fully explain how this secondary market works (is there really such a secondary market?). I invested in Security Bank tier-2 unsecured subordinated bank notes in 2004 (callable in 2009 with 12% annual rate payable twice a year). Between LTNCDs and tier-2 notes, I am inclined to put my “extra cash” for the next 5 years into the latter. I think the most recent DBP and PSBank tier-2 notes give a 9% to 10% annual return.

hi leo, what is the minimum placement for a tier note? I assume it’s also tax free.

The minimum investment for an individual investor is 500K. Maturity is 10 years but callable option is 5 years. If investment is held for 5 years + 1 day the earning is tax free. Just the other day DBP is reported it will soon issue another tranche of tier-2 notes.

Central Bank recently approved BDO-Pci to issue Tier II, i saw it in the news today…… i hope thier Tier II will offer interest rate of around 10 - 12, masyado namang mababa kung 9 and sana like in Leo’s tier II with security bank, i hope thier minimum is 500K too…..

Sana naman meron tier 2 na 250K minimum…