Retail bonds to go on sale in July

The Jakarta Post ,  Jakarta   |  Thu, 05/18/2006 1:11 PM  |  Business

The Jakarta Post, Jakarta

The government will issue retail bonds with a minimum subscription price of between Rp 5 million (US$555) and Rp 10 million at the end of July in a bid to raise Rp 2 trillion.

The Finance Ministry's director general of the treasury, Mulia P. Nasution, said Wednesday that the government was preparing the necessary infrastructure for the sale of the bonds.

The ministry's director general of treasury note management, Rahmat Waluyanto, told reporters that the government was also preparing regulatory guidelines for the bond issue.

""We are now in the process of selecting retail agents,"" he said.

He said that to date 55 financial institutions, including banks and stock exchanges, were likely to satisfy the requirements for selection.

""We hope we can get 20 agents by the end of May,"" he said. ""After that, we will focus on publicizing the issue.""

Mulia said that the government was optimistic that the retail bonds would be sold out very quickly.

The government hopes to issue bonds with a total value of Rp 24.9 trillion this year, of which bonds worth Rp 22.8 trillion have already been issued. Because the government has repaid old bonds worth Rp 7.1 trillion, it plans to issue other bonds worth at least Rp 9.2 trillion by the end of the year.

""For the next issue, the amount of the retail bonds will be determined by the purchasing power of the banks and investors,"" he said without elaborating.

""We want to make sure that the issuance of the bonds will not affect the banking industry,"" he said.

Mulia said that unlike the previous bonds, the nominal value of the bonds to be issued in July would be set at a lower level to make them more affordable to small investors, including individuals.

The previous bonds were offered at prices ranging between Rp 5 billion and Rp 10 billion, making them affordable only to institutional investors.

To make the previous bonds affordable to small investors, some agents have been buying them in bulk and then reselling them at retail prices.

Bank Permata, for example, launched a retail bond service Wednesday with minimum subscription prices of Rp 100 million and US$50,000. The bank hopes to sell up to Rp 2 trillion in government retail bonds.

In response to the launch, Rahmat, who also attended the event, expressed his appreciation to the bank.

""Everyone, including the banks and stock exchanges, has the right to sell retail bonds. This will support the liquidity of the government bond market,"" he said.

Bank Permata, in which the government holds a 25.9 percent stake, is the country's eighth largest bank by assets and is controlled by London-based Standard Chartered Bank Plc. It reported an 8.3 percent increase in net interest income to Rp 1.69 trillion last year. (09)

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