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Investors can now buy and sell government bonds on the
Surabaya Stock Exchange (SSX), which previously only traded corporate
bonds.
Finance Minister Sri Mulyani said that by allowing the exchange to
trade government bonds, transactions would be more transparent, which
would, in turn, give rise to fairer prices.
"As trading on the bourse is more transparent, investors will obtain
fairer prices when buying and selling," Mulyani said Tuesday at a
ceremony to mark the launch of government bond trading on the SSX.
Government bonds have so far been traded outside the bourse through a
number of designated banks and securities firms. Such over-the-counter
trading is conducted bilaterally based on bargaining. Consequently,
buyers often find themselves in the weaker position due to a lack of
price benchmarks.
The government, however, does not intend to discontinue its
over-the-counter bond sales despite the weaknesses inherent in the
system.
SSX president director Bastian Permana said that the Capital Market
Supervisory Agency (Bapepam-LK) needed to issue a regulation to allow
banks to trade their government bonds on the bourse.
He said this was needed to improve the liquidity of the bond market as
banks currently held 60 percent of total government bonds.
At present, banks can only trade their government bonds outside the
bourse.
As of April 27, the total value of tradable treasury bonds in
circulation amounted to Rp 422 trillion (46.8 billion) and $7 billion,
while the amount sold on the secondary market stood at Rp 123 trillion,
an increase from Rp 112 trillion in January.
Also on Tuesday, the government bought back Rp 1.4 trillion-worth of
bonds maturing between 2008 and 2012, and sold the same amount of
longer-term notes to lower its interest costs. The original bonds were
replaced by new bonds due with a yield of 10.25 percent due in 2022.
The government has bought back a total of Rp 11.2 trillion-worth of
bonds this year.
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