Sovereign and Recap Bonds
To buy or sell Government bonds, investors should contact a broker who, on their behalf, will organize the purchase or sale either over-the counter or at the Indonesia Stock Exchange (IDX).
Nonbank investors who want to trade on the secondary market must coordinate through the any of the following Sub-Registries:
- ABN Amro NV – Securities Services
- Bank Central Asia - Custodian
- Citibank – Client Account
- Custodian Services Bank Niaga
- Deutsche Bank AG
- HSBC Jakarta Account Client
- PT Bank International Indonesia
- PT Bank Mandiri (Persero)
- PT Bank Negara Indonesia, Tbk.
- PT Bank Rakyat Indonesia
- Standard Chartered – Account Client
The investor then opens a trading account at these Sub-Registries or at their preferred banks.
A trade begins with the investor asking a broker-dealer to place a bid or offer on the Over-the-Counter Fixed Income Services (OTC-FIS) system, where it can be accessed by other participants in real time. Through OTC-FIS, traders can view the best quotation and contact the counterparty for further negotiation.
Banks and securities companies that are members of the Indonesian Government Securities Trading System (IGSTS) may directly trade government securities with each other. IGSTS is also connected to OTC-FIS, allowing nonmembers to easily monitor trading.
In general, there are no fees charged to investors in transacting bonds. However, securities companies acting as broker charge a spread between the buying and selling price, including fees charged by OTC-FIS (for transaction up to IDR 100 billion, the fee is 0.375 bps, and above IDR 100 billion, the fee is 0.25 bps). Trades are done over-the-counter and then reported on OTC-FIS.
After a trade is completed, the buyer and seller enter the purchase instruction into their Bank Indonesia – Scripless Securities Settlement System (BI-SSSS) terminal. BI-SSSS matches the instructions by checking the securities’ ownership and availability of funds from the buyer. Transactions are carried out simultaneously on a delivery versus payment (DVP) basis. However, since trade is carried out over-the-counter, settlement may vary. On average, Sub-Registries settle 2 days (T+2) after the trade.
After settlement, BI-SSSS sends confirmation advice to Bank Indonesia and the Sub-Registries, which send statements of account to the buyer and seller.
As Central Registry, Bank Indonesia registers security ownership for the account of banks, Sub-Registries, and participants approved by Bank Indonesia.
Sertifikat Bank Indonesia (SBI)
SBIs trade over-the-counter. Retail investors should contact their banks or brokers for assistance. SBIs settle 1 day (T+1) or 3 days (T+3) after the secondary market trade.
Bank Indonesia (BI) as paying agent pays coupon by crediting banks that holds government bonds.
Investors’ banks are pre-advised of incoming funds from BI, and are required to make these funds available to investors on coupon payment date.
If investors use a bank account and Sub-Registry at different institutions, the funds are credited to the investors account on payment date, but the investor may not be able to withdraw until the following day, given the need to clear the payment through the Jakarta clearing system.
Coupon interest is paid quarterly or semiannually according to the terms and conditions of the issued bonds. The coupon is paid on the coupon payment date or the next business day in Jakarta.
Reopenings are the offering of new securities with the same terms and conditions as an existing issue. They are used to increase the size of an outstanding issue. A reopened bond has the same maturity date, security identifier, and coupon rate as the original security. The only difference is that they have a different issue date and usually, a different purchase price based on current market yields.
Procedures for purchasing reopened issues are the same as purchasing a new issue.