NextGen Day

Secretary of Finance Carlos Dominguez III urged small investors to invest in the Philippines’ first-ever onshore retail dollar bond (RDBs) offering on September 15, 2021 (Wednesday), as this income opportunity is a “win-win proposition” that will promote financial inclusion while raising funds for the country’s economic investments and comprehensive effort to defeat the panda.

According to Dominguez, the Bureau of the Treasury’s (BTr) newly launched RDBs, as well as the digital innovations in place to make investing in them easier and more convenient, will allow Filipinos, particularly overseas Filipino workers (OFWs), to purchase government securities without having to pay “huge commissions to brokers and traders.”

Bonds.PH, the Overseas Filipino Bank (OFBank) and Land Bank of the Philippines (Landbank) mobile apps, and the Treasury’s online ordering facility are among the digital advancements.

Bond offerings like as the RDBs will also help to strengthen local capital markets, according to Dominguez.

“Our small investors will be able to diversify their investment portfolios by purchasing retail dollar bonds. They are not required to maintain their dollar assets in low-interest bank accounts. Small investors may now increase their US (United States) dollar savings with a minimum investment of only $300, or approximately 15,000 pesos,” Dominguez said during the RDBs’ virtual debut.

He claims that moving government-issued bond purchasing and selling online has made investing in the “seamless and virtually friction-free.”

BTr has developed a mobile application for the public to obtain information on the national government’s fundraising and debt management efforts, in order to help investors learn about and comprehend them.

“I urge our citizens to put their money into dollar bonds. This is a win-win situation for all parties. Retail dollar bonds are a secure way to invest and earn money. Purchasing them would help generate money for our economic initiatives and the country’s overall pandemic-fighting campaign, according to Dominguez.

According to him, the BTr’s bonds “open up the financial system to small investors and promote more efficient intermediation.”

“Overall, this contributes to the Philippine economy regaining its vitality as quickly as possible,” Dominguez said.

The BTr had previously said that it has partnered with the country’s major banks to allow small investors to purchase RDBs on favorable conditions.

Several banks have agreed to set the minimum initial deposit and average daily sustaining balance requirements for individuals who wish to buy these US dollar-denominated instruments to zero, according to National Treasurer Rosalia de Leon.

Banks would no longer be required to require depositors to establish dollar accounts with a minimum balance of USD500 to USD1,000 in order to participate in RDBs under this proposal to democratize dollar-bond investment.

The RDBs will be the BTr’s first onshore US dollar-denominated bonds, with quantities starting at USD300.

De Leon said that the BTr offered two accounts for individuals to invest in RDBs, the plain US Dollar and PesoClear alternatives, in order to reach the broadest potential investor base.

Those who want to invest in RDBs in US dollars must establish US dollar accounts with a local participating bank, which will act as the cash settlement account, where the interest profits and principal repayment at maturity will be credited to the investor, according to de Leon.

Apart from eliminating the normal criteria for establishing dollar accounts, de Leon claims that many banks have pledged to make it simpler and safer for RDB investors to create US dollar accounts without having to visit their offices.

Investors who do not have US dollar accounts may buy RDBs using their current Philippine bank accounts using the PesoClear option.

The investor will pay the peso equivalent of the face value of the RDBs in the first investment, depending on current market exchange rates.

Throughout the life of the RDBs, the investor’s settling bank will automatically convert quarterly interest payments and principal repayments at maturity into pesos and credit them to the investor’s Philippine account, all at the current market exchange rate.

Given these arrangements, the BTr has begun holding financial literacy workshops to explain the dangers associated with this new instrument, particularly foreign currency concerns, and to ensure that investors are aware of the risks associated with their investments prior to buying RDBs.

In collaboration with Philippine embassies, the BTr has already conducted webinars for abroad Filipinos from 20 countries.

The BTr will host more financial literacy webinars in the coming weeks, according to de Leon.

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