Investing in retail treasury bonds

IT USED to be that bonds were out of the reach of the small Pinoy investor. But that all changed when retail bonds were offered by both the government and the corporate world. Offering a higher interest rate than time deposits, retail bonds are quite popular given their minimum investment requirement. For retail treasury bonds (RTBs) offered by the national government, investors can invest with a minimum placement of P5,000 and in multiples of P5,000 thereafter. Retail corporate bonds vary in amount, depending on the issuer. Currently, the government is offering RTBs maturing in 2012 (3-year RTB), 2014 (5-year RTB), and 2016 (7-year RTB). The offering period started last September 15 and ends on September 22. Interest rates are as follows: 5.25percent for the 3-year RTB 6.25percent for the 5-year RTB 7 percent for the 7-year RTB Although the interest rates are lower than that of RTBs offered last year, the current batch to be issued on September 24 is enjoying good patronage. Interest will be subject to 20 percent withholding tax. Here are the reasons why someone should consider investing in RTBs, according to Ed Francisco, head of BDO Capital: 1. It's risk free. 2. The rate is much higher than leaving it in bank deposits. 3. You get automatic credit of interest every quarter to your bank account. 4. You are credited at maturity. 5. Should you need money before the RTB matures, you can sell it. There will be a ready market. 6. Some banks will allow you to borrow against your RTBs. 7. You can choose from various tenors, e.g., 3, 5 and 7 years. Since RTBs get “sold out” fast, those intending to invest should go to these banks and financial institutions before the offer period ends: BDO, BPI Capital, Development Bank of the Philippines, First Metro Development Corporation, Landbank, Metrobank, and RCBC. RTBs suit the conservative or beginning investor, but longtime investors with more experience also consider RTBs to diversify their portfolios.