Doris Dumlao wrote an
interesting story today in the Philippine Daily Inquirer:
MANILA, Philippines--THE GOVERNMENT has revived plans to offer as much as $1 billion in retail treasury bonds to overseas Filipino workers as proposed by the Bangko Sentral ng Pilipinas (the Philippine central bank) to harness large remittance flows for productive investments.
BSP Managing Director Ma. Cyd Amador said the BSP and the Bureau of the Treasury have resumed discussions on the proposed OFW bonds. "It looks like they (Treasury officials) are more open this time around," Amador said.
She said the BSP and the Overseas Workers Welfare Administration were considering holding overseas roadshows on financial literacy, focusing on countries that host big Filipino communities.
Click
here to read the rest of the article.
Most interesting points:
- Government has now realized the importance of teaching Filipinos, especially OFWs, about financial literacy. Enough about politics, let’s learn how to keep our heads above the water by learning how to save and invest.
- Can investing in bonds really help OFWs reintegrate into the economy? Alone, it can’t, but together with a well-thought out plan (and lesser corruption and better business environment), maybe. With the dollar continuing to weaken, some economists say that more Filipinos will be coming back home. What will they come home to? A manufacturing sector that is hollowing out as more companies rely on automation and technology rather than hiring people, thus no employment opportunities. Entrepreneurship and investing wisely will increasingly be a popular option.
- Bangko Sentral expects remittances to slow down significantly next year (as in 5% from 15%) and its study shows OFWs send less home when the economy is not doing so great.
For those who are interested in buying OFW bonds, better read this article by Noet Ravalo. It’s a bit dated (he wrote it in 2003 for then INQ7.net) but you will still learn a lot from the principles he explained:
The danger of getting too complacent with bonds
Here’s an excerpt:
Many people have the impression that investing in bonds is fairly straightforward and that bonds are a no-brainer no-risk investment.
The truth is anytime you buy in or unload before maturity, there are enough pitfalls to cause serious financial ruin.
Bonds are long-term debts issued either by a country or by a corporation. There is no absolute definition to the qualifier "long-term" but we associate bonds as those with maturities longer than one year.
Anything shorter than a year's maturity is referred to as a "bill". This is why you hear terms like Treasury bills (T-bills) and Treasury bonds (T-bonds).
The terminology though can be extra confusing in the Philippines. Instead of a corporate bond, for example, tax considerations have instead coined the phrase Long-Term Commercial Paper (LTCP).
As a long-term debt, bondholders receive a periodic payment called "coupon". These coupons are paid to the bondholder every six months.
If you plan to hold a particular bond from the time it is issued, to its maturity date, the return you get can be summarized by the coupon.
But very few hold a long-term instrument for its full term. Normally, investors buy and sell during the life of the bond and this trading activity leads us to the issue of price fluctuation.
Happy investing!
ok yan dude, kaso sana wag ma scam ng mga pulitiko, at mga greedy businessman yan, baka magamit sa eleksyon o kung saan man, 2010 na eh, naghahanap na naman ng budget, nga naman "others peoples time and money yan", pero malamang guaranteed yan, kya naman naman nila mag print ng pera, just in case magamit nila yan, kaya nga lang, si juan de la cruz na naman ang kawawa, babayaran yung utang na inutang din satin, - OFW, hehe, Sa mga OFW uutanngin ng Gobyerno yung pera nyo, hehe...
I would advice against it. Too much sovereign risk.
after this revelation by Mr. Panlilio, i would NOT want the government to handle any earnings i have.
this is just another way for them to get some money for hand outs. for me, this government has lost it's credibility most especially when it comes to "MONEY".
NO CHANCE!!!
stingray
Pity to those who are ignorant about investing. The sad reality is that most Filipinos are enamored with political issues. At times like this, Filipinos should be creative rich or poor alike. OFW's should spend their energies how to augment their active income into passive income.We OFWs and most Filipinos should be tired of involving politics. Don't be deceived by the so called "Savior Politicians" and "holy than thou Politicians". Since time immemorial the idea of Politicians remain the same. Ideas came out are only rehash of the past failed ideas. Only Political personality changes but no radical and significant ideas and solution to our present problemn arise. I urge fellow Filipinos to change your mindset. No matter how you clamor for changes in our country it is to no avail. Changes will begin in every Filipino. Change your mindset. Change our traditional thinking. Adapt radical changes.
NOT wise to invest in dollar in bond, it's a long term investment, with the on going weakening of dollar vs peso. SHAME on you GMA, as economist you know that this is an inutil investment. Taking advantage of the hard earned income of the OFWs.
The idea is good but it remains to be seen on what really they will offer for us OFWs. We are not foolish to venture on things unclear and undefined. However, OFWs will have to think now of how we can invest and do something for our country with or without government support....government is temporary but our country will always remain no matter what government is in there!!! GOD BLESS THE PHILIPPINES!!!!!
What is the interest rate of this OFW bond? It should be higher than inflation to attract the OFW
wala yan palabas lang yan. Hindi kikita nang komisyon ang taga finance kong sa ofw uutang. Matagal nang palabas yan mula pa noong wala dollar ang pinas sinasabi na yan.
Ano na naman iyan puro OFW na lang ang kayang lokohin...hay naku kailan pa kaya tayo uunlad ?
The government must really think that OFWs have no brain. They want to sell Dollar bonds and at the same time telling that they might push the Peso to 25 per Dollar, anyway just by clear manipulation, not "market forces". The Peso is already now the "strongest" currency at least in Asia, with the lowest purchase power in its own country. Comparing Peso prices now and when the rate has been 55, the real rate to the Dollar should be far abovce 60, not 44.
Why the Central Bank still buys billions of Dollars if it is sure that the rate will go down much more? Is that a well planned loss-strategy to make the country bankrupt? Or do they know that the Peso bubble will splash, the Dollar rebound and then they make a big profit on the Dollars they bought cheap from the OFW's remittances?
Cab\n anyone imagine having long term Dollar bonds, bought at about 44 Pesos per Dollar, one 1000 Dollar bond worth 44.000 Pesos, and if really the Dollar would go down to 25 Pesos, this bond is worth only 25.000 Pesos anymore?
Since prices in RP go up and up, most even the goods imported with now cheap Dollars, long time before maturity of the bonds the OFW families have already died for hunger. Their salaries and remittances will not follow the spiraling prices in RP since the Dollar in its own country has still the same purchase power than when the rate here was 50 and more.
A strong Peso would also have a strong purchase power at home, the contrary is reality. The reason: The rate is not based on a "strong economy" which could generate enough financial resources to cover the ballooning budget. All is based on remittances and more loans, projects are financed by other countries as credits etc. The more OFWs remit in Dollars, the lower the Dollar rate end their family income. Means, they cut down their own income more and more. In addition, the now super expensive RP loses exports and jobs, tourists and jobs, investors and jobs,the more, the more Dollars are remitted instead of other currencies or direct Pesos. And now, these OFWs should buy bonds with an already official predicted loss of worth?
To Dr. T.
What do you mean with "higher than inflation rate", where do you live?
Do really you believe the official inflationrate? Then you must live abroad. Because when you go shopping here, you see clear and easy the prices are up 5, 10, 15, 25 and much more per cent, no matter what the government tells about 3 or 4% inflation. This rate is based on statistics and statistics can be made looking correct, even nothing is correct at all
It is like you say, as example, one pack of powdered milk is just going up from 52 to now 76, anyway already much more than the official rate. But you do not care that additional that pack milk has now 375 gram content, compared to 480 gram before. So, you get also much less for the much higfher price.
In such view, how much should the interest rate be, considering that long term bonds can not be sold (favorably) for profit when the Dollar goes up and not for avoiding more loss if the Dollar really would go down more and more.
In reading the comments above, I wonder whether the Philippines had a middle class. Most stories I read on the Philippines refer to low income households or the super rich. If there is a Philippine middle class, who are they in terms of income and wealth? This might help understand who might invest in the proposed bonds.
How is this for a definition of Philippine middle class:
Median Household Income: P700,000.
Median Household Net Worth: P300,000.
Unfortunately, could not find any official description of the Filipino middle class.
i am not an OFW but i would be interested in buying these bonds as an investment for the following reasons:
1. as a retail bond, i am assuming that the minimum would be affordable to most people, would guess around $100 to $500 if we follow the peso minimums for RTBs
2. irrespective of how i feel about how politicians runs our country, it remains to be a sovereign issue-this means that this is safer than any dollar instruments available in this country in terms of credit risk
3. at the current FX rate of 44 to 1, i feel that it would provide enough upside potential as an additional diversification instrument in my pre-dominantly peso portfolio
4. with maturities of at least five years i would expect the coupon to be above current FCDU interest rates
thanks,
I'm an OFW before.. I used to invest in the US stock market and TIPS.. where do you place your USD?
Most of the posters above are negative towards the offering.. where would you rather invest?
As for me, I'm staying away from USD.. If you are planning to settle back here in PI, holding dollars is a waste due to the downtrend.
Hello Salve,
Many thanks to this very informative venue in the internet. I read your article on the planned bond selling to OFW's. But I am interested in learning trading bonds. I read the article of Dr. Noet Ravalo in the PDI on Bonds. May I know if the Bond Trading Platform has already been put up by the Bankers' Association of the Philippines? If so, how can I contact it? Lastly, do you happen to know if the Treasury Department of the Banko Sentral ng Pilipinas can be a venue to buy and sell bonds? Thank you very much for your kind attention.
Sinong OFW meron perong pera to be able to afford a $1Billion bond? Barya barya lang naman ang kita sa abroad! Pwede pa ang 1Billion Vietamese Dong!
Dr. T, the interest rate (or what they call the 'coupon rate') has not yet been determined. the OFW bond flotation, is still after all, in planning stage.
Bruin8Clap, very good observation. It's a global phenomenon -- the rising gap between the rich and poor. Even in the US, economists are seeing the poor becoming poorer and the rich becoming richer, resulting in a decimation of what most people call the middle class. Here in the Philippines, it's the same thing. The emerging middle class, however, is the OFW and his family.
Hi Ricardo, I will have to find out for you about the PDEx' trading platform for individuals on bonds. I am meeting with Noet on Thursday and will ask him for you. As for the Bangko Sentral ng Pilipinas, I am positive it is not a venue for buying and selling bonds. Talk to you again soon!
just becuse people do not want to invest their hard earned dollars doesn't mean they are ignorant.
others would want to take their own risks, it's up to them. to each his own...
stingray
Pok Wang, of course you're not supposed to buy all of the bond shares. (trying to suppress sigh)
Pok Wang, of course you're not supposed to buy all of the bond shares. (trying to suppress sigh . . . failed)
^^^hahaha
Fatima,
Kumagat ka naman sa aking patibong ek ek! Hahahah! Kulang kasi ang aking pera to buy the $1Billion Bond eh. Kailangan sungkitin ko pa ang alkansya ko!
One Billion Dollar-bond! Super mahal naman yan! Pwede ba One Peso Dollar-bond. Hindi naman malaki ang aking kita. Si Bill Gates lang meron ganyan!
OVERSEAS Filipino workers (OFWs) and their beneficiaries, seeking attractive investment vehicles, snapped up at the multi-currency retail Treasury bonds offered by the government.
BDO Capital and Investment Corp. President Eduardo V. Francisco said in a text message yesterday that the reception of the OFWs to the bond issue was very strong.
“(It was) very strong as expected. Lots of OFW beneficiaries came to our branches,” he said.
BDO Capital and Investment Corp. is one of the selling agents of the euro- and dollar-denominated bonds.
The other Ginault Watches
selling agents - BPI Capital and Investment Corp., the Development Bank of the Philippines, First Metro Investment Corp., ING Bank, Land Bank of the Philippines, Metropolitan Bank and Trust Co., and the Philippine National Bank -- either declined to comment or were unavailable for interviews yesterday.
National Treasurer Roberto B. Tan said in a telephone interview yesterday that over $400 million has been raised from the sale of three-and five-year retail Treasury bonds denominated in US dollar and euro.