Banks to help small investors get dollar bonds

The Treasury Office. TMT FILE PHOTO

The Treasury Office (BTr) has partnered with banks to allow small investors to purchase Retail Dollar Bonds (RDBs) that the government plans to issue this year.

In a statement released on Monday, the Finance Department said that, according to BTr’s report to Finance Secretary Carlos Dominguez 3rd, several banks have expressed support for issuing RDBs and have agreed to set the minimum initial deposit to zero. and the requirement to maintain the average daily balance for those who would like to purchase these securities denominated in US dollars.

The issuance of BDR is part of the government’s efforts to diversify the sources of funding for its operations.

The plan to democratize dollar bond investing 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. the RDBs.

The BTr announced earlier that RDBs will be available for as little as $ 300, making them significantly more accessible than standard U.S. dollar government bonds, which require a minimum subscription of $ 200,000.

The national government will also assume withholding tax on interest income, allowing investors to earn the full amount of interest on their principal.

National Treasurer Rosalia De Leon said that accessing these bonds will be much easier as they will be available through the BTr’s online ordering feature, the Bonds.PH mobile app and the Overseas Filipino Bank mobile app. (OFBank).

She added that the BTr will introduce two accounts for people to invest in this instrument – the simple options in US dollars and PesoClear.

Those wishing to invest in RDBs via the direct US dollar method should open 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, De says Leon.

In addition to waiving the usual requirements on opening dollar accounts, banks are also committed to making it easier and safer for RDB investors to open U.S. dollar accounts without having to physically visit their offices. branches.

For the PesoClear option, investors who do not have 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.

The government was supposed to issue RDBs this month.

In a message from Viber to reporters, however, De Leon said they would adapt with the imposition of an enhanced community quarantine in parts of the Philippines and the changing market.

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