Treasury Bills Vs. Fixed-Rate Treasury Notes Vs. Retail Treasury Bonds: Are They Different?
Investing is the next step after saving toward achieving financial freedom. Investing allows you to grow your wealth and outpace inflation. Whether you're just getting started in investing or are looking to diversify, there are different types of investments in the Philippines worth exploring. Some of these investments are treasury bills (T-bills), fixed-rate treasury notes (FXTN), and retail treasury bonds (RTB).
Not quite sure what these are? Don’t worry! We’re here to help you understand the differences between treasury notes vs treasury bills vs treasury bonds in the Philippines.
Treasury Bills Vs. Retail Treasury Bonds Vs. Fixed-Rate Treasury Notes
Treasury bills, retail treasury bonds, and fixed-rate treasury notes are all types of peso-denominated fixed income securities issued by the Philippine government.
What are fixed income securities? These are debt instruments issued by the Government or Private Corporations debts owed to investors by the government (or a corporation) that pays a fixed amount of interest. As types of fixed income securities in the Philippines, treasury bills, retail treasury bonds, and fixed-rate treasury notes all carry minimal credit risk because they are backed by the Philippine government, particularly its ability to tax its citizens.
While all these investments are sensible choices, they each have distinct features that may make a big difference in your finances.
What are Treasury Bills?
Treasury Bills (T-bills) are a short-term debt obligation by the Philippine government. They are relatively low-risk investments that mature within a year or less. These have a minimum transaction amount of Php 100,000. RCBC’s Treasury Bills are a great investment for those who are looking for fast returns.
Treasury Bills are not like the usual investment products. They are a zero-coupon debt instrument, which means that investors don't earn interest. T-bills are sold at a discounted price compared to the bond’s face value. Investors earn “interest” from the difference between the purchase price and the bond’s value upon maturity.
While this investment offers guaranteed returns, a disadvantage here is that fixed returns may end up being lower than other investments, especially when interest rates rise. An investor may not fully benefit from favorable market conditions if their assets are tied to T-bills.
One of the factors that make T-bills attractive is their relatively default-free nature from being backed by the national government. However, this advantage is largely dependent on the issuing country’s stability, so T-bills still carry some default risk in addition to the usual inflation and market risks.
What are Retail Treasury Bonds?
Retail Treasury Bonds (RTB) are another debt obligation by the national government, which means that it is also relatively risk-free. RTB investments start at Php 5,000. It’s also quite flexible in terms of maturity, as terms can range from two years to 25 years.
The main difference between treasury bills and retail treasury bonds in the Philippines, apart from the term, is that the latter offers relatively higher returns for longer terms and pays quarterlyinterest twice a year. Thus, retail treasury bonds can serve as a steady source of income, making it a great long-term investment, especially for those preparing for retirement.
One disadvantage of treasury bonds, however, is the lower returns, when compared to the yield ROI of other investment products. This investment also carries some inflation risk since interests don’t grow with the market’s interest rate. However, what Retail Treasury Bonds offer is stability during volatile markets, which is why it’s a great choice for those who need a stable source of income and diversification in investing.
What are Fixed-Rate Treasury Notes?
A fixed-rate treasury note (FXTN) is another debt instrument issued by the Philippine government. These are short-term to long-term investments with relatively low default risk. Throughout its term, owners receive an interest payment every six months. The owners also receive the full value of the note after its maturity, which starts at Php 100,000.
The main difference between treasury notes and the other two types of treasury investments is the flexible term offerings. RCBC’s Fixed-Rate Treasury Notes allow short-term, medium-term, and long-term investments –2,5,7,10, 20, up to 25 years.
Like the first two types of treasuries, fixed-rate treasury notes carry some level of interest rate and price risks. This means that a FXTN's value may fluctuate depending on the prevailing market conditions.decrease due to inflation, credit risks, earnings volatility, poor management, and industry risk.
Start Investing Today!
Treasury Bills, Retail Treasury Bonds, and Fixed-Rate Treasury Notes are all fixed income securities issued and backed by the Philippine national government. They all carry minimal risk, making them great investment options for beginners and investors who prefer stable, long-term investments.
The main difference between the three is the maturity or term period, with T-bills being more short-term and RTB and FXTN offering medium- and long-term investments. These small differences in term periods are a major factor in investment strategies, so it’s important to consider them thoroughly.
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