RI to sell first retail bonds

The Jakarta Post ,  Jakarta   |  Tue, 05/30/2006 1:48 PM  |  Business

Urip Hudiono, The Jakarta Post, Jakarta

Those looking for an alternative in which to invest besides time deposits, stocks and mutual funds may be interested in the government's plan to issue retail bonds aimed at individual investors this July.

A total of Rp 2 trillion (US$215 million) in such bonds will be offered on July 28, the Finance Ministry's director for bond management, Rahmat Waluyanto, told reporters Monday. The bonds will be sold through designated banks and securities firms.

The three-year bonds, bearing the code ""Indonesian Retail Bond 001"" or ""ORI001"", will be the country's first-ever retail bond issue.

Rahmat said he expected the issue to produce a high level of interest among individual investors considering the benefits, including relatively higher returns compared to time deposits and mutual funds.

""Holders of the bonds will receive attractive, monthly accrued interest payments,"" he said. ""The bonds will also be tradable at a par value on the primary bond market.""

Rahmat, however, declined to give the coupon rate for the bonds yet, pending actual bookbuilding and auctioning, but said it would definitely be somewhere between time deposit interest rates and the yield on ordinary government bonds.

The interest rates on time deposits currently stand at between 8 and 10 percent, while the yields on similar-term bonds are 12 percent.

The bonds are also fully guaranteed like ordinary bonds. However, ordinary bonds can only be bought by institutional investors, like banks, securities firms and fund managers.

To buy the retail bonds, Rahmat said that interested investors would only have to open an account with a bank or securities firm designated by the government to sell the bonds. Investors could also open accounts with any of the sub-registry agencies appointed by the central bank to administer the trading of the bonds, which will come in denominations of Rp 1 million.

""The minimum purchase is Rp 5 million, and investors can buy more multiples based on the same minimum amount,"" Rahmat said. Investors will also be subject to quotas during the auction.

The government is currently short-listing 15 banks and securities firms to be designated as the official vendors of the bonds. They will be officially appointed for this purpose on June 26.

The government hopes to raise Rp 24.9 trillion in net proceeds from bond sales this year to help plug its budget deficit, which is expected to come in at Rp 22.4 trillion, or 0.7 percent of gross domestic product (GDP).

Besides retail bonds, the government has also resorted to the global bond market -- it first offered global bonds in 1999 -- and is mulling the issuing of syariah-based sukuk bonds this year.

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