Investing in Premyo Bonds 2

Updated by

This website is already late to the party, and if it hadn’t been for the Facebook UITF group there wouldn’t be a post about Premyo Bonds 2 that was on offer late last year.

(We don’t know how this information has gone past our notice as we are keen to document any bond offerings from the Bureau of the Treasury made for the retail investors. So we thank the people from Facebook for alerting us.)

Nevertheless, this article is a review on this fixed income security offered by the government.

Premyo Bonds 2

See below the summary of the Premyo Bonds 2 offering such as offer period, issue date, maturity, interest, and payment schedule.

NamePremyo Bonds 2
ISIN/Series CodePPBD0121L027
Offer periodNovember 11, 2020 – December 11, 2020
Issue dateDecember 16, 2020
Maturity dateDecember 16, 2021
Tenor (years)1 year
Minimum500
Increment500
Maximum (per transaction)None
Interest1.25%
Interest periodQuarterly

1. What is Premyo Bonds 2

Before anything else, it is important to know what a bond is. It is a proof of that an institution is in debt with someone or with another institution.

As an evidence of borrowed money, it entitles the lender to receive interest within a specific period of time, which is called tenor, and upon which the debt is paid back in full.

There are corporate bonds (issued by companies). On the other hand, the government issues retail treasury bonds and treasury bills, among other ways to raise funds. Examples are Progreso Bonds RTB 24, RTB 2020, and RTB 25.

Towards the end of 2020, the Bureau of Treasury made available the new version of the successful Premyo Bonds that was first launched in 2019.

During that very first offering, Filipinos from all walks of life can subscribe to these debt instruments, get paid through interest, and had a chance to win prizes.

On its second year Premyo Bonds 2, also called PB-2, was a peso-denominated fixed income security where people could lend their capital to the government and earn fixed interest. Moreover, they could participate in raffles to win exciting cash and non-cash prizes.

2. What is the maturity date?

It had a tenor of 1 year. The maturity date is on December 16, 2021.

3. What is the Premyo Bonds 2 interest?

The interest, or coupon rate, was set at 1.25% in a year. Interest would be divided in four equal payments issued every quarter subject to a withholding tax of 25%.

In comparison, the potential earning is considerably less than the first issue of the Premyo Bonds which was set at 3% when it was offered in 2019. While the return on investment is lesser this time around, it is still higher than bank accounts such as savings account, savings account for kids, or time deposit.

4. What will the government use the raised funds from the sale of Premyo Bonds 2 for?

The money collected through this offer will be allocated to help the country’s economy ravaged by the ongoing pandemic by augmenting the government’s Covid-19 response.

Other news reports also stated that it would help fund educational programs and public infrastructures.

5. When was the Premyo Bonds 2 offer period?

The bonds were up for grabs from November 11, 2020 to December 11, 2021. Issue date was slated last December 16, 2020.

6. How much could you invest?

Investors can subscribe for as low as ₱500, and they can sign up for as long as additional amounts were in multiples of ₱500.

According to the terms, there was no maximum amount set.

However, a limit was set on the maximum number of entries to the raffle draws. The Treasury allowed up to only 20,000 entries (equivalent to a capital investment of ₱10 million).

7. What is the raffle all about?

Every bondholder who invests could eligible for the quarterly raffle draws. Each capital of ₱500 invested entitles to one bond unit, which is equivalent to one entry that would be selected for the raffle that would happen every three months since the issue date.

Twenty lucky winners will ₱20,000 each, another ten winners for ₱100,000, and one lucky grand prize winner of ₱1 million and Toyota vehicles.

For investors with placements of 20,000 bond units (equivalent to ₱10 million capital), twenty (20) of them are eligible for ₱50,000 each.

The Treasury could increase the number of winners depending on the total issue of the bond, which was originally set at ₱3 billion. According to news reports, the issuance was successful and oversubscribed, raising a total of ₱6.56 billion.

8. What are other details of the offer?

Bondholders of the first Premyo Bond can submit an offer to exchange their holdings.

ISINSeries NameInterestMaturity
PPBD0120L010Premyo Bonds 13.00%December 18, 2020

Advantages of Premyo Bonds 2

Below are some of the advantages when investing in Premyo Bonds 2. For a fuller discussion more pros and cons, you can read the article on investing in bonds in general and retail treasury bonds in particular.

  • Safe. They are backed by the government, and in turn by the Filipino taxpayers.
  • No fees. There are no associated transaction fees like sales load to worry about that can diminish your capital and income.
  • Periodic income. The quarterly interest payment can benefit people who would need regular, predictable income, i.e. those on pension, retirees, students, etc.
  • Better rate. The stated interest is higher compared to deposit accounts.
  • Capital preservation. Less risks on capital loss.
  • Diversification. Investing in them can be a good way to diversify current portfolio of more aggressive nature such as equities, index funds, balanced funds, or feeder funds.

Disadvantages of Premyo Bonds 2

  • Not tradeable. Once subscribed, ownership can be switched to someone else.
  • No cancellation. It cannot be pre-terminated, and one must carry it through maturity.
  • Low interest. Lower than other passive income such as Pag-ibig MP2.
  • Tax. Earnings are taxable by the rate of 20%.
  • Inflation risks. Interest may not be enough to cover for inflation.

How much can you earn through Premyo Bonds 2?

So much could investors earn from Premyo Bonds 2?

In order to estimate potential earnings from this investment, let us imagine two scenarios. Say that there are two starting capitals, one at ₱100,000 and another at a million pesos. 

See below the earnings for 1 year.

Capital100,0001,000,000
Interest1.25%1.25%
Quarterly interest312.503,125.00
After-tax quarterly interest250.002,500.00
After-tax annual interest1,00010,000
Total interest1,00010,000

How can you invest in Premyo Bonds 2?

You must have at least a bank account and not a member of the Rewards Committee and do not have access to the Premyo Bonds Rewards application system.

There are four ways to subscribe:

  • Over the counter through selling agents
  • Through the Treasury website
  • Through the Bonds.PH mobile app
  • Through Overseas Filipino Bank mobile app

Through over the counter via selling agents

You can go to one of the following institutions: Development Bank of the Philippines, Landbank, BDO, BDO capital & Investment Corporation, Chinabnk, Metrobank, First Metro Investment Corporation, PNB Capital, or UnionBank

  1. Either use your peso-denominated deposit account or open a new one.
  2. Fill out the subscription form.
  3. Make sure that your submit the required papers.
  4. Pay the principal cost.
  5. Track the quarterly interest.
  6. Check upon maturity all accrued interest and paid-back capital.

Through the Bureau of the Treasury website

  1. Open Premyo Bonds.
  2. Understand and agree to the terms, and then click “Ready to Order”.
  3. Fill out the forms.
  4. Choose your preferred settlement bank.
  5. Log into your bank’s portal.
  6. Pay the investment amount.
  7. Wait for the confirmation via email.

Through Bonds.PH mobile app

  1. Download Bonds.PH app
  2. Sign up and verify
  3. Select Cash in.
  4. Choose preferred payment channel
  5. Cash in and confirm you cash in details.
  6. Complete cash in request by paying the amount
  7. Invest in bonds click Buy.
  8. Select the bond.

You can also watch the tutorial video.

Through the Overseas Filipino Bank

Overseas Filipino Bank is the branch-less, all-digital bank by Land Bank of the Philippines.

  1. Download Overseas Filipino Bank app.
  2. Agree to terms and conditions.
  3. Fill out the required info.
  4. Nominate username and set password.
  5. Fill out the OTP twice, just click submit.
  6. Nominate security questions.
  7. Submit selfie.
  8. Submit valid ID.
  9. You can cash in through Landbank and other payment agencies.
  10. Open the app again.
  11. Click Payments.
  12. Purchase Treasury Bonds, and select Premyo Bond.
  13. Confirm transaction.
  14. Or you can also watch the video below.

References

Tags