T

he government saw public demand for its retail bonds exceed expectations as the debt papers'€™ high coupon rate lured individual investors from housewives to entrepreneurs.

The Finance Ministry announced Monday that it booked Rp 27.44 trillion (US$1.8 billion) in total sales from the preliminary indicative target of Rp 20 trillion for the retail bonds code-named ORI012.

The ministry'€™s director for government bonds Loto Srinaita Ginting told a press briefing that the high coupon rate '€” at 9 percent, the highest since 2010 '€” had attracted investors to the debt papers.

'€œLenders adjust their time deposit rates due to lower loan disbursements and there is a possibility of a [Bank Indonesia (BI)] rate cut as inflation declines, making the ORI012 relatively more lucrative,'€ she said.

Domestic banks have lowered their deposit rates to cut costs amid a domestic economic slowdown, a recent report from the Indonesia Deposit Insurance Corporation (LPS) showed.

Indonesians have opted to save instead of spend against the backdrop of a domestic economic slowdown that has hurt people'€™s purchasing power, with a recent Bank Indonesia (BI) consumer survey predicting an increase in savings over the next few months.

The government'€™s retail bonds will mature in three years, with a two-month minimum holding period and a coupon rate paid monthly. Previously, bondholders were only required to hold their debt papers for one month.

Data from the ministry showed that as many as 49,521 investors in 34 provinces across the nation purchased the bonds, less than half of whom were new investors. Around 25.24 percent of the investors were private sector workers, 21.36 percent were entrepreneurs and 11.30 percent were housewives.

The average volume per buyer was Rp 554 million with most of them, or around 36.7 percent, ordering between Rp 100 million and Rp 500 million of the retail bonds.

The issuance of the ORI012 will bring the government'€™s bonds issuance realization to Rp 439.27 trillion so far this year, already 95.24 percent of the gross target of Rp 461.2 trillion to plug the state budget deficit.

The bond issuance target has taken into account a potential uptick in the state budget deficit to 2.23 percent of GDP, compared with 1.9 percent in the official revised 2015 state budget.

Loto said that the sale of retail debt papers was the government'€™s effort to diversify its investors.

'€œWe will accommodate more retail purchases next year if we see a higher appetite from this investor basis,'€ she said, adding that retail investors were relatively more resilient to losses than institutional investors.

Meanwhile, Malaysia-based rating agency RAM Ratings reaffirmed Indonesia'€™s respective global-scale and ASEAN-scale sovereign ratings of gBBB2(pi)/stable and seaAA3(pi)/stable, which were premised on the country'€™s fiscal strength, demonstrated by low government debt levels and commendable fiscal management.

It wrote in a statement made available on Thursday that the agency noted that the country experienced net foreign inflows owing to favorable longer-term prospects during the first half of this year.

'€œNonetheless, as portfolio investments account for about a third of the country'€™s liabilities, and in view of the substantial foreign ownership of government debt, at about 40 percent as at end-June 2015, we remain cautious over potential capital reversals in times of heightened global aversion,'€ the statement read.

The ministry'€™s data showed that foreign investors owned around 83.74 percent of the total mid and long term tradable state securities as of Oct. 15. (prm)