How and Where to Buy Treasury Bonds (T-Bond) of Developing Countries?
Government issued treasury bonds (T-Bonds) of developing nations or countries with emerging economies, like Brazil, India, Philippines, etc, has become attractive to some income investors due to one primary reason - it has a relatively higher yield. Unlike developed countries like US, T-bonds of developing countries have a higher interest rate mainly because of a higher risk associated with it. This risk however might still be lower compared to corporate bonds because it is guaranteed by the issuing nation’s government. Interest rates of T-bonds of developing countries could range to more than 9% while T-bonds of countries like US is less than 7% lately.
Okay, but how can an individual investor buys a treasury bond? Government treasury bonds are normally issued first to big time investors, particularly to banks, brokers and fund managers. This is called the primary market. These banks and brokers, on the other hand will sell in retail the bonds that they acquired to small-time or individual investors at a smaller minimum quantity. This is now the secondary market. Individual investors can also trade T-bonds in the secondary market.
Therefore, if you are living in one of the developing nations, you could buy a treasury bond at your nearest favorite big bank.
But what if you want to buy treasury bonds of other developing countries, can you still buy this type of security? Well, this is also the question that I am trying to answer for myself. As far as I know, if u have a contact to a bank and have a bank account to that country where you want to buy a treasury bond, you could possibly buy one. But there is an easy way, why don’t you just buy shares of Exchange Traded Funds (ETF) and Close Ended Fund (CEF) that invests in emerging economies Treasury bond? Managers of these funds buy a basket of treasury-bonds of emerging markets in the primary market and issue shares of these funds in the secondary market. Purchasing ETF and CEF would be easier and maybe less risky for individual investors than buying T-bonds directly in the banks.
Related Keywords: Third world country, t-bonds, rtb, retail treasury bond, Philippines, India, Indonesia, Brazil, Mexico, Venezuela, Peru, Russia, China
Filed in: Fixed Income
Local date: February, 2012
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