Bond Issuance Depends on Government

By Editorial Team 20/09/2019
Summary

Bank Indonesia (BI) on Thursday (9/19) cut its key interest rate, the BI-7 Day Reverse Repo Rate, by 25 basis points (bps) to 5.25 percent. The third cut in straight months would affect the bond coupons offered by the government, both government bonds (SUN) and Indonesian Retail Bonds (ORI). The ORI16 to be traded on 10-24 October 2019 will be the first to assess the market after the rate cuts.

Reflecting on previous state securities offerings, such as SUN or Sukuk, or sharia-compliant bond, the coupon rate offered by ORI016 is likely lower than the last government-issued retail bonds. The lower coupon rate would undoubtedly affect the investor's decision to purchase, though this is not absolute, since the latest state Sukuk auction last Tuesday (9/17) was still in high demand despite the lower coupon, with offers reaching Rp 29.03 trillion.

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