Bond Market Indonesia: Weak Demand for ORI014 Retail Bonds

These proceeds are well below the indicative target of IDR 20 trillion (approx. USD $1.5 billion) that was set by the government. The low coupon rate - 5.85 percent - is primarily blamed for the poor performance of ORI014 bonds, especially considering tax still needs to be paid. The 5.85 percent coupon for the three-year bonds was the lowest in the history of ORI bonds (since 2006 the Indonesian government has been issuing ORI bonds once per year on average).

Even the three-year government bonds (locally known as SUN) carry a more attractive rate at 6.1 percent. Also the guaranteed interest rate of the Indonesia Deposit Insurance Corporation (IDIC) on rupiah deposits made by commercial banks and rural banks is higher at 6.00 percent.

Generally, interest rates have been declining in Indonesia due to the central bank's push for a lower interest rate environment over the past 1.5 years, slashing its key rate from 7.00 percent to 4.25 percent in a bid to boost credit growth and economic expansion.

Indonesian ORI Bond Series:

ORI	Year	Coupon     (%)	Maturity Date	Investment   (in trillion)
001	2006	12,05	08-08-2009	IDR 3.3
002	2007	9,28	28-03-2010	IDR 6.2
003	2007	9,40	12-09-2011	IDR 9.4
004	2008	9.50	12-03-2012	IDR 13.5
005	2008	11,45	15-09-2013	IDR 2.7
006	2009	9,35	15-08-2012	IDR 8.5
007	2010	7,95	15-08-2013	IDR 8.0
008	2011	7,30	15-10-2014	IDR 11.0
009	2012	6,25	15-10-2015	IDR 12.7
010	2013	8,50	15-10-2016	IDR 20.2
011	2014	8,50	15-10-2017	IDR 21.2
012	2015	9,00	21-09-2018	IDR 27.4
013	2016	6,60	15-10-2019	IDR 19.7
014	2017	5,85	15-10-2020	IDR 8.9

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