Govt launches lowest ever retail bond coupon rate

JAKARTA. The Finance Ministry launched the ninth series of its retail bonds on Friday, codenamed ORI009, which would offer a 6.25 percent coupon rate, the lowest yield ever since the government started offering retail bonds in 2006.

The retail bonds the ministry sold last year, ORI008, offered a coupon rate of 7.3 percent and were almost two times oversubscribed. This year, although the bond’s coupon rate is at its historic low, the ministry expressed its optimism that the ORI009 would still be attractive to domestic investors, given the fact that it was still higher than yield offered by Indonesian banks’ deposit rates that currently stands at around 4 to 5 percent.

“Besides, there’s a sense of pride when you buy government bonds, knowing the money will be allotted to the country’s development. It's different when you put your money in banks because your money will go to private sector,” said Finance Ministry director general of debt management Robert Pakpahan.

The ministry has targeted to raise at least Rp 12 trillion (US$1.25 billion) for the bonds to support government financing, Robert said. “However, this is not a fixed target and there’s still room to upsize if we see a strong demand from the public.”

The ministry appointed 22 banks and securities companies as the selling agents of the retail bonds, including state-owned Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia, as well as Danareksa Sekuritas and Trimegah Sekuritas, among others. The ORI009 will mature on Oct. 15 2015.

Until Sept. 18, the Finance Ministry has raised Rp 206.8 trillion from bonds financing by selling government bonds and Islamic bonds, which reached 76 percent of its annual target of Rp 270 trillion. Besides launching the retail bonds, the ministry planned to introduce so-called samurai bonds, or government bonds denominated in yen, in the fourth quarter this year to meet the target. (The Jakarta Post)