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Invest P500, win P1M. Gov’t to offer ‘prize’ bonds good for ‘aguinaldo,’ too

By: - Reporter / @bendeveraINQ
/ 04:55 PM October 29, 2019

The Bureau of the Treasury will sell “prize” bonds in ticket multiples of P500 in December, which will give individual investors a chance to win as much as P1 million.

On the sidelines of Tuesday’s treasury bonds auction, National Treasurer Rosalia V. de Leon told reporters that the mechanics for the upcoming prize bonds issuance would be finalized by first week of November for launching by middle of the month.

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The Treasury was looking into offering the one-year prize bonds to individuals, associations and cooperatives within a three-week period ahead of Christmas Day, De Leon said.

Prize or lottery bonds “give the holder a chance to win a random monthly drawing for a tax-free cash prize” as these “do not pay interest, but they do encourage saving,” according to Investopedia.

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De Leon said this would be similar to the “premyo savings bond” offered in the 1970s.

But unlike the premyo savings bond where the entire yield went to the raffle prize, the new prize bonds to be offered by the Treasury will have some amounts set aside for the bigger winnings on top of coupon payments.

Prizes would range from as low as P20,000, P100,000 and as high P1 million, De Leon said.

“You don’t get the full coupon, but you’ll have the opportunity to get higher earnings coming out of your investment for as low as P500,” De Leon said.

“Unlike other cash prizes, you’ll get back your principal. So the principal will be protected—at the end of one year, you can redeem the P500. So you’re not throwing away any good money at all,” De Leon added.

The prize bonds will have quarterly coupon payments and quarterly draws, she added.

“Instead of giving your godchildren P500 cash, you can give them this investment—they can still redeem it after one year and they have the opportunity for that higher return,” according to De Leon.

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These bonds may be purchased online through state-run lenders Development Bank of the Philippines (DBP) and Land Bank of the Philippines (Landbank), which would tap other local private banks as selling agents.

The Treasury also sold all P20 billion in reissued seven-year T-bonds at 4.322 percent below secondary market and the previous auction’s rates.

De Leon attributed the declining rate to expectations of further easing inflation.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno’s had announced earlier that there will be additional liquidity unleashed into the system when banks’ reserve requirement ratio (RRR) are again slashed in November and December and a possible rate cut by the US Federal Reserve.

“Everything’s going into one direction towards easing—both domestic and external,” said De Leon.

“We’re awash, flushed with cash that bodes well for the reduction in terms of the rates and, of course, the good reception we’re getting” for government securities, she said.

The auction generated P56.9 billion in bids, making it nearly thrice oversubscribed.

To date, the outstanding volume for this treasury bond series maturing on Feb. 14, 2026 amounted P120.4 billion.

Given the strong demand, the Treasury offered another P20 billion in its tap facility window.

The over-the-counter facility is usually tapped when the Treasury decides to sell more securities to meet high demand. The tap facility also allows the government to raise additional funds when money generated from regular auctions fall below targets./TSB

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TAGS: auction, Bonds, invest, prize, tax-free, Treasury
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