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Govt rolls out new retail bonds with higher coupon rate

Best sellers: Finance Minister Bambang Brodjonegoro (second left) hands best-selling agent awards to Bank Mandiri consumer banking director Hery Gunardi (second right), Bank Central Asia (BCA) president director Jahja Setiaatmadja (left) and Bank Panin president director Herwidayatmo (right) in Jakarta on Monday

Tassia Sipahutar (The Jakarta Post)
Tue, September 22, 2015

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Govt rolls out new retail bonds with higher coupon rate Best sellers: Finance Minister Bambang Brodjonegoro (second left) hands best-selling agent awards to Bank Mandiri consumer banking director Hery Gunardi (second right), Bank Central Asia (BCA) president director Jahja Setiaatmadja (left) and Bank Panin president director Herwidayatmo (right) in Jakarta on Monday. The ministry hopes that sales of the government bond ORI012 series will reach Rp 20 trillion (US$1.38 billion) this year in order to plug the 2015 state budget deficit, which accounts for 1.9 percent of the gross domestic product (GDP). The bonds can be ordered from Sept. 21 up to Oct. 15.(JP/Jerry Adiguna) (second left) hands best-selling agent awards to Bank Mandiri consumer banking director Hery Gunardi (second right), Bank Central Asia (BCA) president director Jahja Setiaatmadja (left) and Bank Panin president director Herwidayatmo (right) in Jakarta on Monday. The ministry hopes that sales of the government bond ORI012 series will reach Rp 20 trillion (US$1.38 billion) this year in order to plug the 2015 state budget deficit, which accounts for 1.9 percent of the gross domestic product (GDP). The bonds can be ordered from Sept. 21 up to Oct. 15.(JP/Jerry Adiguna)

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span class="inline inline-center">Best sellers: Finance Minister Bambang Brodjonegoro (second left) hands best-selling agent awards to Bank Mandiri consumer banking director Hery Gunardi (second right), Bank Central Asia (BCA) president director Jahja Setiaatmadja (left) and Bank Panin president director Herwidayatmo (right) in Jakarta on Monday. The ministry hopes that sales of the government bond ORI012 series will reach Rp 20 trillion (US$1.38 billion) this year in order to plug the 2015 state budget deficit, which accounts for 1.9 percent of the gross domestic product (GDP). The bonds can be ordered from Sept. 21 up to Oct. 15.(JP/Jerry Adiguna)

The government launched on Monday new retail bonds '€” code named '€œORI012'€ '€” in an effort to raise funds for financing.

It expects to pocket at least Rp 20 trillion (US$1.38 billion) from the retail bonds, whose coupon has been set at 9 percent per year, the highest since 2010.

The offering period will run until Oct. 15, while the allotting period and the settlement period are set at Oct. 19 and on Oct. 21, respectively. The bonds themselves will mature on Oct. 15, 2018.

The government has appointed 21 banks and securities firms as selling agents for the new ORI.

The list of selling agents consists of Bank Central Asia (BCA), Bank Mandiri, PaninBank, CIMB Niaga, Citibank, Bank Danamon, DBS Indonesia, HSBC, Bank Internasional Indonesia (BII), Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI).

It also includes Bank Tabungan Negara (BTN), OCBC NISP, Standard Chartered Bank, ANZ Indonesia, Bank Bukopin, PermataBank, Danareksa Sekuritas, Reliance Securities, Sucorinvest Central Gani and Trimegah Securities.

The minimum order for the ORI has been set at Rp 5 million, while the maximum order has been set at Rp 3 billion, according to a statement issued by the Finance Ministry.

The Finance Ministry'€™s financing and risk management office (DJPPR) director general Robert Pakpahan said the selling agents had actually expressed their ability to sell up to Rp 34.6 trillion-worth of ORI012 to retail investors.

'€œWe have not decided whether or not to upsize the target. We think it will still be OK to increase the target to around Rp 25 trillion. If the demand turns out to be higher than the target, we will have a meeting on that,'€ he told reporters.

This year'€™s target is set at the same level as previous retail bonds issuances in 2013 and 2014. The government managed to raise Rp 20.2 trillion in 2013 and booked Rp 21.21 trillion a year later.

Robert added it was also the first time that a minimum holding issuance for retail had been extended to two months from the previous one month.

'€œWe'€™re actually hoping that domestic retail investors will keep the bonds until they mature, instead of trading them in the secondary market after the minimum holding period expires,'€ he said, adding that retail investors still made up a small portion of the investor base.

Latest data from the DJPPR showed that retail investors only accounted for around 8 percent to 9 percent of the total, which the ministry claimed was an indicator that regular Indonesians had not considered bonds as an investment tool.

Finance Minister Bambang Brodjonegoro acknowledged that the country'€™s financial market still lacked depth and was below its potential. '€œIdeally, 50 percent of the middle-class population owns financial products other than banking ones,'€ he said.

Meanwhile, the issuance of the ORI012 will bring the government'€™s realized bonds issuance to more than 90 percent of the gross target, which is earmarked at Rp 452.18 trillion for 2015.

By Sept. 17, the amount of issued bonds already stood at Rp 395.7 trillion or 87.5 percent of the total.

The ministry'€™s director for government bonds Loto Srinaita Ginting said government bond yields had shown quite a significant decline, following the US Federal Reserve'€™s decision to hold its key policy rate.

'€œThe steepest decline was recorded within two series of bonds. The FR0070, which is the 10-year benchmark, saw its yield fall to 9.03 percent from 9.26 percent. Meanwhile, the yield of the FR0068, which is the 20-year-benchmark, dropped to 9.23 percent from 9.46 percent,'€ she said.


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