Bonds

Bond is one of the Securities listed on the Exchange in addition to other Securities such as Shares, Sukuk, Asset Backed Securities or Real Estate Investment Trust. Bonds can be classified as debt securities in addition to Sukuk. Bonds can be described as long-term, transferable, long-term debt, which contains the promise of the issuing party to pay interest in the form of interest at a specified period and repay the principal of the debt at a predetermined time to the buyer of the bond. Bonds may be issued by both the Corporation and the State.

As a comparison of Bonds with Shares and other Financial Instruments, it can be seen in the table below :

Difference

Instrumen

Bond

Sukuk

Shares

Deposit

Protected Funds

Due Dates

x

Interest Rate

x

x

x

Return/Nisba

x

x

x

x

Dividend

x

x

x

                     x

Capital Gain Potency

x

State Guarantees

x

x

Trading on the secondary market

x

Stand by buyer on Secondary Market

x

x

x

Debt Securities are listed in the Exchange

To date, there are several debt securities listed on the Exchange, among others:

  1. Corporate Bonds, ie bonds issued by National Private Companies including State-Owned Enterprises and Local-Owned Enterprises.

  2. Sukuk is a Sharia Securities in the form of certificates or proof of ownership of equal value and represents an inseparable or undivided share (syuyu '/ undivided share) on the underlying asset.

  3. Government Securities (SBN) is a Government Securities consisting of Sovereign Debt Instruments and State Sharia Securities.

    • Sovereign Debt Instruments (SUN) are securities in the form of debt instruments denominated in rupiah or foreign currency guaranteed by interest payment of principal and principal by the Republic of Indonesia in accordance with the validity period. The provisions concerning Government Securities are regulated in Law Number 24 Year 2002 concerning Sovereign Debt Instruments.
    • Government Shariah Securities (SBSN) or State Sukuk are state securities issued under sharia principles, as evidence of the participation in SBSN Assets in both rupiah and foreign currency. The provisions concerning SBSN are regulated in Law Number 19 Year 2008 concerning State Sharia Securities.
  4. Asset Backed Securities (EBA) are debt securities issued with Underlying Assets as the basis of issuance.   

Advantages to buy Debt Securities

Here are the benefits of buying Debt Securities, among others:

  1. Earn periodic coupons / fees / ratios of debt securities purchased. In general, the rate of coupon / fee / ratio is above the interest rate of Bank Indonesia (BI rate).

  2. Obtain capital gains from sale of debt securities in the secondary market.

  3. Has a relatively lower risk than other instruments such as stocks, where the movement of stock prices more fluctuated compared to the price of debt securities. In debt securities issued by the government can be regarded as a risk-free instrument.

  4. Many options of debt securities series that can be selected by investors in the secondary market.

         

Trading of Debt Securities

Generally, securities debt instruments are traded through over the counter (OTC) mechanisms. The Exchange provides a special system to facilitate the trading of debt securities, known as FITS (Fixed Income Trading System). FITS is a system (automated remote trading) owned by Indonesia Stock Exchange to facilitate trading of debt securities in Indonesia.

In addition, there is also a reporting system for debt securities transactions, known as CTP-PLTE (Centralized Trading Platform - Securities Transaction Reporting). CTP-PLTE is an electronic system, which can be used as a means of trading and reporting debt securities transactions.

With the debt securities trading, it will occur the formation of debt securities prices, which are influenced by demand and supply of debt securities. The basics that may affect the fair price of debt securities traded in the Exchange are as follows:

  1. Interest Rates

    The amount of interest rate becomes the reference for the buyer of debt securities as the basic comparison of expected rate of return. The market interest rate in this case can be a BI rate. When the market rate changes, it will affect the price of debt securities. As the market interest rate rises, while the rate of return on debt securities is fixed, the real returns from investors are considered to be relatively smaller. This will lead to the sale of debt securities, so that the price of the securities is down. Vice versa

  2. Risk Factors

    Credit risk describes the ability of a debt securities issuer to make interest payments or principal redemption in a timely manner in accordance with its maturity. In general, debt securities are regularly rated by the Securities Rating Agency. Investors can take advantage of debt securities rating information from the Securities Firearms to measure the risk of investing in a debt securities and assess the level of credibility of a company, and can also show the performance / prospects of the company. When the debt securities rating decreases, it indicates the risk level of the Issuer in fulfilling its obligations to be lower which in turn can potentially default. This condition will cause the price of debt securities to decrease. This is due to the demand for debt securities also decreased because the debt is not considered attractive to investors.

  3. Due Date

    Debt securities listed on the Exchange have different periods of maturity. At maturity, the Issuer has an obligation to return the entire principal of debt securities to the Investor. Generally, the price of debt securities is inversely proportional to the term of the bonds. The shorter the duration of debt securities, the smaller the level of uncertainty (risk) of debt securities. In addition, the more the debt-induced effect is near its maturity date, then the price of the effect will be closer to its par (par) value.