BTr partners with banks on retail dollar bonds for small investors
MANILA – The Treasury Office (BTr) has partnered with the country’s major banks to allow small investors to purchase on favorable terms Retail Dollar Bonds (RDBs) that the government plans to issue this year to meet part of its domestic financing needs for 2021.
In a report to Finance Secretary Carlos Dominguez III, BTr said several banks have expressed support for its RDB issuance and have agreed to set the minimum initial deposit and average daily balance requirement at zero for those who would like to. buy those US dollars. – labeled titles.
BDR’s issuance is part of the government’s efforts to diversify its sources of funding for its operations and is in line with President Rodrigo Duterte’s goal of financial inclusion for all Filipinos.
This plan to democratize investment in dollar bonds means that banks would abandon their current practice of requiring depositors to open dollar accounts with a minimum balance of $ 500 to $ 1,000 before they could invest in them. BDR.
RDBs will be the first onshore bonds denominated in United States (US) dollars to be issued by BTr for amounts as low as $ 300, said national treasurer Rosalia De Leon.
De Leon said RDBs “will provide small investors with a tool to diversify their investment portfolio outside of the Retail Peso Treasury (RTB) bonds and regular Premyo bonds”.
âWe plan to make RDBs available to individual investors for a minimum amount of just $ 300, significantly lower than the minimum amount for investing in traditional Philippine bonds denominated in US dollars of $ 200,000,â de Leon said in his report.
In addition to offering RDBs at a small minimum investment amount, she said accessing these bonds will be much easier as they will be available through BTr’s online ordering system, the Bonds mobile app. PH and the Overseas Filipino Bank (OFBank) mobile app. .
To offer RDBs to the widest possible investor base, de Leon said the BTr will introduce two accounts that allow people to invest in this instrument – simple options in US dollars and PesoClear.
Those who wish to invest in RDBs via the direct US dollar method should open US dollar accounts with a participating local bank which will serve as a cash settlement account where interest and principal repayment at maturity will be credited. to the investor, she said.
In addition to waiving the usual requirements on opening dollar accounts, de Leon said several banks are committed to making it easier and safer for RDB investors to open U.S. dollar accounts without having to go. physically go to their branches.
Regarding the PesoClear option, investors who do not have US dollar accounts can use their existing Philippine bank accounts to purchase RDBs.
In the initial investment, the investor will pay the peso equivalent of the face value of the RDBs based on prevailing market exchange rates.
During the life of the RDBs, the investor’s settlement bank will automatically convert the quarterly interest payments and principal repayment at maturity into pesos and credit them to the investor’s Philippine account, all at market exchange rate during transactions.
Given these structures, BTr has started its financial education sessions to discuss the risks of this new instrument, in particular currency risks, and to ensure that investors understand the risks of their investments before purchasing securities. RDB.
To date, BTr has already organized webinars for overseas Filipinos from 20 countries in coordination with Philippine embassies. More financial literacy webinars will be scheduled by the BTr in the coming weeks, said de Leon.
In recent years, the Bangko Sentral ng Pilipinas (BSP) has introduced a series of foreign exchange liberalization reforms that have improved individuals’ access to foreign currency.
As a result of these reforms, investors interested in RDBs could easily buy currencies from their banks to use them to buy the bonds, de Leon added. (RP)