Jeepney Press / ADVICE NI TITA LITS

by Isabelita Manalastas-Watanabe

Dear Tita Lits Readers, and all other OFWs in Japan:

Last Feb. 22, 2021, a zoom meeting for Filipinos/OFWs in Japan was arranged by our Philippine Embassy in Tokyo, to discuss investing in Retail Treasury Bonds (RTB). I joined that meeting, as I thought I could help in disseminating the information, at least to my company’s remittance clients, if not to all OFWs in Japan.

However, as you can see from the above marketing collateral introducing RTB25, we cannot anymore participate in the offering as the deadline was last March 4, 2021 already. Those who joined that Feb. 22 zoom meeting had only a window of less than two (2) weeks to make a decision to invest, much less to understand better what an RTB is, and to complete various requirements to be able to participate. I asked the head of our Bureau of the Treasury if the offering could be extended, but the answer was no.

There may be succeeding offerings in the future, so I would like to assist our OFWs in making very basic and simple explanation on whether it is worth investing in RTBs or not.

1. As you can see in above marketing collateral, the annual interest rate offered is 2.375%, higher than the prevailing savings rate (or even time deposit rates) offered by Philippine banks, and super high as compared to interest rates in Japan (almost zero, to negative!).

2. Note, however, the maturity of the investment – three (3) years. It means you are expected to hold on to the RTB for at least 3 years, to be able to enjoy the full 2.375% annual interest;

3. You have to remember that if you are earning in Yen, then you need to remit your Yen to your acceptable RTB settlement Peso savings account in the Philippines, to be able to purchase, or sell your RTBs;

4. If you are in the Philippines, and earn in pesos, then you do not have to worry about foreign exchange (FX) risk. Invest in Pesos; earn in Pesos;

5. But if you are using foreign currency like Yen to remit to your designated bank settlement account in the Philippines, you have to think of the possibility of an FX loss (or gain).

Example:

(1) The Yen has been relatively weak recently; whereas we used to get PHP4,600 or more for our JPY10,000, now we get much lower (current exchange rate as of this writing is around 0.4350, or PHP4,350 for your JPY10,000);

(2) PHP5,000 is the minimum amount you need to purchase one (1) RTB. So if you remit PHP5,000 to your settlement bank account in the Philippines, and the JPY/PHP exchange rate you got was 0.4350, you will need to remit JPY11,495 (PHP5,000 divided by 0.4350);

(3) So you bought one (1) RTB, investing JPY11,495 for this;

(4) Your annual interest earnings for your PHP5,000, @2.375, will be PHP118.75 if you will continue to keep your RTB and not terminate it;

(5) So you have earned PHP118.75 for the first year;

(6) The JPY/PHP rate can rise to 0.4600 very easily a year from now. So your original investment for your RTB of JPY11,495, will be worth PHP5,287.70 (JPY11,495 x 0.4600), without doing anything. Your Yen has gained by PHP287.70 as compared to PHP118.75 interest on your RTB (which you still have to hold on for another 2 years);

(7) Of course, it can also happen that the JPY/PHP rate can go down by 0.4250 for example. If this happens, your JPY11,495 original investment will be worth PHP4,885.38, less than the PHP5,000 original investment.

I think you get the picture. It means that when we invest from one currency to another currency, our exposure to possible loss (or gain) is always there. A Peso to Peso investment will give you Peso earnings, so no need to worry about FX loss. But of course, there is also inflation that will affect the real value of your Pesos.

If inflation goes up after one year of your investment, your pesos will be able to buy less amount for the same commodity. Inflation rate should then be lower than your anticipated interest earnings, to be able to have a net gain from your investment.

Below are useful links that our Embassy circulated when they invited participation to that zoom meeting last Feb. 22, 2021.

www.treasury.gov.ph link https://www.treasury. gov.ph/rtb25/

FAQs about RTB: https://www.treasury. gov.ph/wp-content/upl oads/2021/02/RTB-25 -FAQs.pdf

Flyer about RTB: https://www.treasury. gov.ph/wp-content/upl oads/2021/02/RTB-25 -Flyer.pdf

To open an Online Overseas Filipino (OF) Bank Account, please check this link: https://www.ofbank.co m.ph/products-service s/e-banking/retail-inte rnet-banking

In the event that there will be another RTB offering for OFWs in Japan, you will be more prepared to make an intelligent decision.

Isabelita Manalastas-Watanabe / Jeepney Press