When
I wrote about
the Bangko Sentral’s plan to revive its proposal to float $1-billion in bonds for overseas Filipino workers, the reactions were a mix of skepticism and curiosity.
Many did not trust the government, so lending money to this administration (which is, in effect, what you would be doing if you buy the bonds) did not make any sense. Others are concerned that the bonds are dollar-denominated, and with good reason because for the past year, the dollar has been losing value against every other currency of the world.
Personal finance expert Alijeffty Gonzales, however, raised some points that should also be considered by many of us.
First, it is an affordable instrument since retail treasury bonds are issued in various units starting with P5,000 for peso-denominated issuances to P100,000.
Second, while the Philippines may not smell so rosy right now because of the political wrangling going on, to most of us a government security still carries sovereign risk and is, technically “risk free.” That’s because, if worse comes to worst, the government can print money to pay you when the time comes to collect from it – as opposed to just any other company in the Philippine capital market universe, even one that may have a triple A rating.
All in all, based on the little information from the plan so far, the OFW bond appears to be a good instrument for diversifying one’s portfolio, Gonzales said.
He, however, pointed out to me another important tipping point: denominating the bond in dollars. “For it to be denominated in dollars would present some concerns, however, as the common consensus now even among the OFW community is that the dollar might not be a "stronger" currency going forward. There could be some risk in terms of loss of parity versus the peso especially if this is five years or more,” he said.
As with any investment decision, weighing the risks versus the advantages is very much a personal thing. As of now, it appears that despite the bullishness of the stock market, Filipino investors appear to have a predilection for bonds. Official figures from the Investment Company Association of the Philippines (ICAP) show that mutual funds have almost P53 billion in bonds as opposed to P13 billion in stock funds.
For those who want to invest in retail treasury bonds, whether designed for OFWs or not, here are the how-tos from AsianBondsOnline:
- Watch out for announcements published in newspapers when retail treasury bonds will be issued. Unlike Treasury bills and Treasury bonds, RTBs do not have a particular schedule.
- Pay close attention to companies that are chosen by the government to be underwriters or agents of the bond flotation. These information are often announced in newspapers and in the underwriter’s website.
- Check with the underwriter or the agent on their application requirements, procedures and details on fees. These things vary from institution to institution.
- If you want to know more details about RTBs, you may want to check this website: http://asianbondsonline.adb.org/how_to_buy_bonds/nd_page.php?Stage_Number=1&ABI_Market_Name=PH&Step_Number=1
Remember that these steps are for those who want to buy RTBs at issuance. The steps and how-tos for trading are different. Will write about that in another post.
Do banks and gov't institutions sell these type of bond on retail basis? Correct me if I'm wrong but I think most banks will sell only the minimum amount of P100,000.
the way i see it, banks sell their high yeilding bonds to the public at a premium or with margin. that way they still make profits using other people money. they dictate the rates as the public still has no direct access to bond trading.perhaps pdex will operate like the pse so that there will be more competition in the bond market.
leo, the latest article today in PDI on the OFW bonds indicate that it will be a "retail treasury bond", meaning it should be sold in units of P5,000 so that it will be affordable for most Filipinos. The BSP is still deciding whether it will be in pesos or dollars.
hi don2x, watch out for noet's next article on bond trading. :-)
hi! i just want to know where specifically can i avail of the OFW bonds. are they available now? who can i contact regarding this?
are there other forms of affordable mutual fund or investment instruments? if there are, what are they?
hi! i just want to know where specifically can i avail of the OFW bonds. are they available now? who can i contact regarding this?
are there other forms of affordable mutual fund or investment instruments? if there are, what are they?
Lara, they are not yet available because the details are still in the works. When I wrote the article, it was in the proposal stage, but I heard from central bank last Friday that it's a go. Look out for articles on this in major newspapers. They will announce when it will be offered, whether it will be denominated in US dollars or other currencies, who will be the bookrunners, the yield and all that.
On the matter of funds specifically targeting the OFW's, I just want to know more about the hedging funds that DBP just recently approved. What are these? How will these work & when will they be available? Thanks! :)
Bonds are always best instrument for investment because they are almost risk free as they are backed by the government. Bonds help you to diversify your risk factor. The OFW bond appears to be a good instrument for diversifying one’s portfolio and so, you should include it in your own portfolio.
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on because for the past year, the dollar has been losing value against every other currency of the world. Personal fin tool bag supplier
thanks for useful information!
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He, however, pointed out to me another important tipping point: denominating the bond in dollars.
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good day sir,im an ofw.i just want only to asked some important question regarding how to invest money safely.i heard T bond,Ginault Watches
mutual fund and UITF.which of them can i invest and can give me a higher interest.how much the initial savings?and besides what is the starting bussiness with the amount of 300t.thanks and more power.godbless.
Investing in always a tricky business, but there are other ways to save money. For example, I work with the Easysaver Rewards program and it helps me a lot. It's the same with investing and making money...
OFW bonds are some of the best bonds that provide the most return on money. Huskies for Sale