If you want regular and predictable income streams while taking on moderate risk, bonds can be a suitable investment option.
Retail Treasury Bonds (RTBs) offer a relatively easier way to put money in bonds by catering to smaller, individual investors. Learn more about this investment option below.
What do RTBs mean for Filipino investors?
RTBs are called “retail” bonds because they’re meant to make bond investing more affordable for retail or individual investors.
The national government, through the Bureau of Treasury (BTr) offers RTBs with a minimum investment amount of P5,000.
This makes them more accessible than other government bond offerings that are typically bought by institutional investors. Such products start at P50,000 or more.
How can you make money from RTBs?
Here are 2 ways you can possibly earn money through RTBs:
- Coupon payments
Issuing bonds is 1 way for the government to raise money for its projects. When you buy an RTB, you are effectively lending money to the government.
As a lender, you’ll receive interest payments called coupons on a regular schedule (like every quarter).
You’ll be paid periodically until the bond matures on a pre-determined date. Upon maturity, you’ll get back the amount you invested.
Some bonds have shorter terms of 1 to 3 years while others have longer terms of 5 to 10 years or even more. Recent RTB offerings had maturities of around 5 years.
- Price appreciation
If you want to get your money before maturity, you can sell your bonds on the secondary market. This can be done through the broker or bank you bought RTBs from.
If the price of a bond goes up after you buy it, you can make a profit by selling it. There’s no guarantee, however, that bond prices will go up over time.
Bond prices tend to change based on supply and demand as well as changes in interest rates.
Are RTBs good for beginner investors?
With a low minimum investment amount, RTBs are within reach of small investors. This is especially helpful for those who are just starting out and have limited capital.
Here are some factors to consider before you invest:
- Accessibility
You can invest in RTBs with multiples of P5,000 during the offer period. They are made available through selling agents like investment firms and banks, and some even allow you to invest online.
- Risk
There’s little possibility of default when you invest in Treasury bonds like RTBs. Governments have a wide range of financial resources and so they only tend to default on debt obligations under extreme conditions.
There are other risks bond investors may face, such as interest rate risk. It is the potential for bond prices to fall as interest rates rise.
This can be a concern if you’re trading bonds on the secondary market. Changing interest rates may not be an issue if you’re happy with a bond’s coupon rate and plan to keep it until maturity.
- Fixed earnings
For new investors, it can be reassuring to start out with assets that provide predictable returns. When you know how much you might earn and when you’ll get paid, there’s no need to worry about making complex decisions.
RTBs might be a good source of steady income as long as the interest rate is acceptable to you, and you won’t have any issues with keeping your money invested throughout the term.
