Investing in Premyo bond

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The Premyo bond were offered by the Bureau of the Treasury in the last quarter of 2019. It was a way for the government to raise funds, encourage people to invest, and support financial inclusion in the country. But what is a Premyo bond? If you do start acquiring them, how do you earn and how much? These are the questions that this article is going to answer.

If this is your first time hearing about them, please consider reading on introduction on bonds and retail treasury bonds.

Premyo bond

Most of the government bonds are sold to institutional investors such as banks and investment houses. They usually require significant capital and involve participating in an auction to bid for them. RTBs meanwhile are made available to the investing public, so they usually are priced in lesser (more affordable) amounts and anyone can invest without having to go through an auction.

Offer period

The most popular example is the Premyo bond, the latest of which was offered between November 15, 2019 until December 13, 2019. Its issue date is December 18, 2019 and the term ends December 18, 2020. The public can invest for one bond unit for as low as ₱500. Each unit also entitles the holder one ticket to a raffle that is held every quarter, where 116 winners are announced and one of whom can get home with ₱1 million.

The aim of the Premyo bond program is to open investment to everyone, not just those who have big sums of money, a move that is made to achieve the government’s action plan for “financial inclusion”.

How do you earn from Premyo bond?

Premyo bond as a retail treasury bond allows you to earn 3% annual interest for a one-year term. When you include the 20% withholding tax, the effective rate is 2.4%. It is a rate that is higher compared to interest earned in savings account and time deposit.

Let us say that you have ₱100,000 capital that you use to buy Premyo bond. That should give you 200 bond units, and that is equivalent to 200 raffle tickets. With 3% interest rate, your gain is ₱3,000. After tax, the net income for your investment is ₱2,400. See the table below for the computation for a capital of ₱100,000 and ₱1,000,000.

Premyo bond
After-tax income2,40024,000
Bond units2002,000
Raffle tickets2002,000