Indonesia Steps Up ORI and Sukri Bond Issuances in 2016

The Indonesian government will increase retail bond issuances in 2016. Robert Pakpahan, General Director of Debt Management at the Ministry of Finance, said the government will issue conventional retail bonds, known as ORI (Obligasi Negara Ritel Indonesia), twice in 2016. Furthermore, the government plans two rounds of sharia-compliant government retail bond (Sukuk Negara Ritel, or abbreviated Sukri) issuances next year. These bonds are only available to domestic investors.

Two issuances of ORI and Sukri in 2016 would mean that the Indonesian government doubles issuances of both instruments. In February 2015, it sold three-year Sukri (SR-007) with an indicative target of IDR 20 trillion (approx. USD $1.5 billion) and a coupon of 8.25 percent. Through this Sukri issuance, which was oversubscribed, the government raised IDR 22.0 trillion.

Regarding ORI bonds, the Indonesian government raised IDR 27.4 trillion (approx. USD $2 billion) in September, far above the indicative target of IDR 20 trillion, in order to tackle an estimated shortfall in the 2015 State Budget. The coupon on these three-year bonds (ORI-012) was 9 percent. Since 2006, the Indonesian government has issued 12 ORI bonds, specifically for Indonesian retail investors/individuals.

Indonesian ORI Bond Series:

 ORI   Year
    Coupon (%)    Maturity Date
 Investment
(in trillion)
   Number of
   Investors
 001   2006         12,05      08-08-2009   IDR 3.28      16,561
 002   2007          9,28      28-03-2010   IDR 6.23      13,158
 003   2007          9,40      12-09-2011   IDR 9.37      22,837
 004   2008          9.50      12-03-2012   IDR 13.46      37,724
 005   2008         11,45      15-09-2013   IDR 2.71      14,001
 006   2009          9,35      15-08-2012   IDR 8.54      24,433
 007   2010          7,95      15-08-2013   IDR 8.0      17,705
 008   2011          7,30      15-10-2014   IDR 11.0      15,372
 009   2012          6,25      15-10-2015   IDR 12.68      25,293
 010   2013          8,50      15-10-2016   IDR 20.2      38,860
 011   2014          8,50      15-10-2017   IDR 21.2     +35,000
 012   2015          9,00      21-09-2018   IDR 27.4

Pakpahan could not yet inform about indicative targets set for next year's four retail bond issuances. He stated that the government increases the frequency of retail bond issuances in 2016 in order to deepen the market and provide more opportunities to Indonesian investors to invest in bonds. As such, it will reduce the influence of foreign ownership in Indonesian government bonds. Currently, around 38 percent of Indonesian government bonds are in the hands of foreign investors (via global bonds, euro bonds and samurai bonds). This makes the country more vulnerable to global economic shocks (sudden reversal of capital flows). However, the government will also raise the value of foreign-denominated bond issuances in 2016.

In October 2015, there was again a foreign net buy in government bonds (Surat Utang Negara, or SUN). Last month, foreigners bought IDR 5.39 trillion (approx. USD $400 million) more government bonds than they sold due to strengthening rupiah rate (in October the rupiah appreciated nearly 7 percent against the US dollar). In the third quarter of 2015, foreign investors recorded a net sell worth IDR 14.1 trillion.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

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