Progreso bond: Investing in retail treasury bond RTB-25

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The Bureau of the Treasury once again targets the ordinary Filipino investors by offering the newest retail treasury bond under the Progreso bond program, the RTB 25.

This article looks into the specific details of this newest offer from the government, what it is, its stated goals, and potential earnings.

RTB 25, the newest Progreso Bond

See below the summary of the details of the RTB 25 offering such as issue date, maturity date, tenor, interest, and interest payments.

NameRTB 25
ISIN/Series CodePIID0324C115
Offer periodFebruary 9, 2021 – March 4, 2021
Issue dateMarch 9, 2021
Maturity dateMarch 9, 2024
Tenor (years)3 years
Minimum5,000
Increment5,000
Maximum (per transaction)500,000
Interest2.375%
Interest periodQuarterly

1. What is RTB-25?

RTB 25 is the latest Philippine bond from the Treasury. Just like the RTB 24, RTB 2020 and Premyo bond, it is a proof of indebtedness of the government that carries a fixed, regular interest. When you subscribe (that is, you “purchase” the bond), the government owes you an amount equal to the capital that you lend, and in return you receive a periodic income. Thus, bonds are considered to be fixed income securities.

When the bond matures, the government then gives back all interest due to you as well as your capital back.

What’s with the name? It is called RTB 25 because it is the 25th of such offerings during the administration of Rodrigo Duterte, the eighth (8th) retail treasury bond issued, the second under the Progreso bond category, and the first of such debt instrument category to be offered this year.

The following banks and institutions are the issue managers: Development Bank of the Philippines, Land Bank of the Philippines, BPI Capital Corporation, Chinabank Capital, First Metro Investment Corporation, RCBC Capital Corporation, SB (Security Bank) Capital, and Union Bank.

2. What is the maturity date?

It has a tenor of three years so its maturity is scheduled in March 9, 2024.

3. What is the RTB 25 interest?

Your earning is described by the interest. The interest is set last February 9, 2021 when the bond was auctioned off to institutional investors, and after the bidding it is set at 2.375% subject to withholding tax of 20%. It is paid out every three months (quarterly).

In comparison, RTB 2020 also was a similarly three-year bond issued months before the lockdown last year, but it had a higher interest of 4.375%. Yet at 2.375%, it is still undeniably superior to most savings account and time deposit.

4. What will the government use the raised funds from the sale of RTB 25 for?

According to Treasury representatives, whatever amount is collected from the sale of these bonds would form part of the national coffer. It would help in boosting government’s efforts against Covid-19 as well as in pushing forward the country’s recovery from the economic crisis brought upon by the once-in-a-century pandemic. By investing, in your own small way you contribute to the “recovery and nation-building.

5. When is the RTB 25 offer period?

As the name “retail” implies, the bonds are available to investors like you starting February 9, 2021 until March 4, 2021. That is, you have nearly a month to subscribe. The issue date is set on March 9, 2021.

6. How much can you invest?

You can invest as low as ₱5,000. If you’d like to invest more, you may do so at multiples of ₱5,000. Lastly, the maximum subscription is set at half a million pesos per transaction. Of course, investors can make multiple transactions.

7. What are other details of the offer of RTB 25?

Bondholders of bonds previously issued by the government that would be maturing this year have an opportunity to swap their holdings. See below the specific securities that can be swapped.

ISINSeries NameInterestMaturityExchange Ratio
PIBD0721C574FXTN 07-573.50%March 20, 2021101.10%
PIBD1021D531FXTN 10-536.50%April 28, 2021100.10%
PIID0321F092RTB 03-094.875%June 13, 2021100.50%
PIID1021J039RTB 10-035.75%October 20, 2021101.00%
PIBD1021K551FXTN 10-555.75%November 24, 2021101.00%

And here is a Youtube video clip on how to switch securities.

Advantages of RTB 25

For more details on the pros and cons as well as the risks, see the article on investing in bonds and here is one specific to retail treasury bonds.

The following are the advantages when you subscribe to RTB-25.

  • The interest rate is generally higher than savings accounts or time deposit.
  • It can be a safe and low-risk way to earn because it is backed by the Republic of the Philippines’ taxpayers.
  • Investors can get periodic quarterly income through interest payments.
  • It is very affordable.
  • You get your principal back after three years.
  • Investing is easy. It can be done using a mobile phone app.
  • Registering an account, subscribing, redeeming and other steps can be done anytime through the app.
  • The bonds are negotiable and transferable.
  • You can make multiple placements during the offer period.
  • Enjoy zero transaction fee when availed through the online ordering facility.

Disadvantages of RTB 25

As mentioned, it shares with the general characteristics, including the downsides, of bonds. Specifically,

  • The interest is low compared to what can be earned through other passive income such as Pag-ibig MP2.
  • Earnings are subject to withholding tax of 20%.

How much can you earn through RTB 25?

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. Since the annual interest is 2.375%, then the annual payment would be ₱2,375 (100K x 2.375%) and ₱23,750 (1 million x 2.375%) respectively.

Now let’s include the tax of 20%. The after-tax annual income would now be ₱1,900 (2,375 x [1 – 20%]) and ₱19,000 (23,750 x [1 – 20%]), respectively. Thus, the after-tax quarterly interest payment then is ₱593.75 (1,900 ÷ 4) and ₱5,937.50 (19,000 ÷ 4), respectively. And the total interest would be ₱5,700 (1,900 x 3 years) and ₱57,000 (19,000 x 3 years), respectively.

See below the summary of the computation.

Capital100,0001,000,000
Interest2.375%2.375%
Quarterly interest593.755,937.50
After-tax quarterly interest475.004,750
After-tax annual interest1,90019,000
Total interest5,70057,000
Cumulative gain9.50%9.50%

And the table below shows the annual income derived from the investment. Upon maturity in 2025, the total would be ₱105,700 and ₱1,057,000, respectively.

YearCapitalInterestCapitalInterest
1100,000.001,900.001,000,000.0019,000.00
23,800.0038,000.00
35,700.0057,000.00
Total105,700.001,057,000.00

How can you invest in RTB 25?

If you are interested, you can subscribe within the offer period. You must however be:

There are many ways that you can invest: through participating banks, through online ordering facility facility, through the Bonds.PH mobile app, and through the Overseas Filipino Bank.

Through participating bank

  1. Inquire if your bank offers RTB 25.
  2. You may use your peso-denominated bank account.
  3. Fill out and required forms.
  4. Prepare any documents that may be requested from you.
  5. Determine the capital that you’d like to invest. This will be deducted from your account.
  6. Wait for confirmation of the transaction.
  7. The quarterly interest is going to be paid out to your bank account.
  8. Upon maturity, your bank account will receive the principal and the last interest payment.

Through online ordering facility facility

  1. Open https://www.treasury.gov.ph/rtb25/.
  2. Read the details of the offer. And then put a check mark under heck mark
  3. Select online facility.
  4. Fill out the form.
  5. Choose settlement bank which is one out of the following: China Bank Corporation, Development Bank of the Philippines, First Metro Securities Brokerage Corporation, or Land Bank of the Philippines.
  6. Agree to terms and conditions, and then click Submit.
  7. When redirected to the chosen selling agents, authorize debit according to the instructions.
  8. Wait for email notice on payment and confirmation of sale.

Through the Bonds.PH mobile app

  • Download BONDS.PH app. Create an account. Make sure to have an email address.
  • Complete the log-in and registration processes. Provide one primary valid ID card or two secondary IDs.
  • Upload a selfie of you with the card in your hand and click Submit.
  • Funds can be loaded into the account via Instapay, Pesonet facility, Gcash, Paymaya or other payment option. Fees may apply depending on the selected payment gateway.
  • Subscribe the retail treasury bond.
  • Check “My Orders” for the status. A notice will be sent via email on successful transaction.
  • Interest is paid out into the account every quarter.

References

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