Beginners Guide: Bonds vs. Neobanks: A Comparison of Interest Rates
Disclaimer: This article is for informational purposes only and does not constitute financial advice. BitPinas has no commercial relationship with any mentioned entity unless otherwise stated.
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One of the notable tips of The Whizkid Trader, or Joseph Lejarde in real life, is that when starting to create a financial portfolio, the investor must first identify their risk appetite. Those with high-risk appetites can enter the world of crypto and stock. But those with low-risk appetites can instead go with bonds and savings at digital banks.
What’s the Significance: This guide aims to show and compare the difference in annual percentage yields that are offered by bonds and from savings in digital banks.
[This article is in collaboration with PDAX. Make your next money move with PDAX by signing up here!]
Table of Contents
Understanding Bonds
What are Bonds?
- A bond is a fixed-interest security where the investor will lend money to the borrower.
- There are two entities that offer a bond, the government or a corporation.
- Technically, if an individual invests their funds in a bond, they will receive interest after the offered maturity date.
- For example, Fernando bought a bond from a traditional bank for ₱10,000. The maturity date is 6% APY for 12 months. After a year, his investment becomes ₱10,600.
Accessibility:
- Most government-issued bonds are offered by traditional banks.
- While corporate-issued bonds are normally offered by financial brokers.
- According to online magazine Pinoy Magazine Talks, most bonds are available to be bought for at least ₱5,000
Bonds on PDAX:
- In November 2023, PDAX CEO Nichel Gaba confirmed that the Philippine Bureau of Treasury (BTr) has approved the sale of tokenized treasury bonds on the blockchain, enabling PDAX to offer these tokenized bonds on its platform.
- These bonds that PDAX offers are used by the national government to fund the executive department’s projects and programs.
- Worth Reading: Philippines Introduces Blockchain Tokenized Treasury Bonds via PDAX
- As of June 17, 2024, PDAX offers two bonds:
- BILL30, with an annual interest rate of 5.70% and a maturity date of October 23, 2024.
- RTB30, with an annual interest rate of 6.25% and a maturity date of February 28, 2029.
- The minimum amount of bonds that users can buy on PDAX is ₱500.
How to Buy Bonds on PDAX:
Understanding Digital Banks
What are Digital Banks?
- A digital bank is a new bank category in the country approved by former Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla in 2020.
- A digital bank largely offers financial products and services that are processed end-to-end through a digital platform and/or electronic channels with minimal to no reliance on physical touchpoints.
- In 2022, the BSP announced that it had finally completed issuing certificates of authority (COA) to the six companies that applied for digital banking licenses.
- Worth Reading: BSP: All Six Digital Banks Now Allowed to Operate
- In an interview with popular Youtuber, food vlogger, and cook Ninong Ry, UnionDigial Bank Chief Executive Ubeh Henry Aguda shared that digital banks normally offer higher rates because they have lower operating costs than traditional banks.
- The six registered digital banks are GOtyme of Robinsons Bank Corp., Maya Bank, Overseas Filipino Bank (OFBank), Tonik Bank of Singapore, UNObank of Singapore, and UnionDigital of the Union Bank of the Philippines.
Accessibility:
- All of these digital banks are available as a mobile app or online website.
- Online transactions to e-wallets are also available.
Interest Rates:
- GOtyme of Robinsons Bank Corp.
- Annual Interest for Savings Account: 4%
- Monthly interest rate to be received: 0.33%
- Maya Bank of Maya, formerly PayMaya
- Annual Interest for Savings Account: Up to 14%
- Monthly interest rate to be received: 1.17%
- Overseas Filipino Bank (OFBank)
- Annual Interest for Savings Account: 0.05%
- Monthly interest rate to be received: 0.004%
- Tonik Bank of Singapore
- Annual Interest for Savings Account: Up to 4.5%
- Monthly interest rate to be received: 0.375%
- UNObank of Singapore
- Annual Interest for Savings Account: Up to 4.25%
- Monthly interest rate to be received: 0.35%
- UnionDigital of the Union Bank of the Philippines
- Annual Interest for Savings Account: Up to 4%
- Monthly interest rate to be received: 0.33%
Comparison Between Bonds and Digital Banks (Neobanks)
| Bonds on PDAX | Savings Accounts on Digital Banks | |
| Interest Rate | Fixed. Returns are predictable. | Situational. The “Up to x%” means the interest rate that a user can get depends on the amount of their savings fund. |
| Regulation | Regulated by the Bangko Sentral ng Pilipinas. | Regulated by the Bangko Sentral ng Pilipinas. |
| Interest Rate | Higher but with a maturity fixed date. | Lower but the interest can be received monthly. |
| Minimum Balance / Fund Required to Buy | ₱500 | None (Only OFBank has a required balance of ₱500) |
Suitability for Investors
- Bonds on PDAX:
- Low-risk
- Offers a more stable and predictable return
- Suitable for medium to long-term goals
- Because the investment fund is locked, it cannot be withdrawn immediately when something happens
- Savings Accounts on Digital Banks:
- Low-risk
- The higher the savings funds, the higher the interest rate can be
- Suitable for short to medium-term goals
- Funds can be withdrawn immediately when needed for an emergency reason
Conclusion
Overall, though bonds on PDAX and savings accounts on digital banks are both for investors that have low-risk appetites, it should be noted that they have differences in terms of suitability.
If you know that you will not need your investment funds even if an emergency happens, you can try holding bonds.
But if you need a fund that earns interest as time passes but can be withdrawn immediately to be liquid in case of emergencies, you can put it in a savings account.
This article is published on BitPinas: Bonds vs. Neobanks: A Comparison of Interest Rates
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