Questions and Answers About Investing in Retail SBN in Indonesia

Previously, we provided general information about what Government Securities (SBN) are, which are investment instruments issued by the Government of the Republic of Indonesia to support state budget financing and national development, intended for individual Indonesian investors and can be one option for portfolio diversification.

This time, we would like to share some information that may answer readers' questions about the definition of this term and other terms related to Government Securities (SBN), especially for novice SBN investors.

Questions About Investing in Retail SBN in Indonesia

1. What is a Coupon?

A coupon is the return paid periodically to investors during the investment period. For retail SBN, coupons are generally paid monthly. The coupon rate can be fixed or floating with a minimum floor.

2. What is the maturity date of SBN?

Maturity is the date on which the investment period ends, when the government will return the principal amount of the investment to investors. The tenor of retail SBNs generally ranges from 2 to 3 years, or more depending on the series issued.

3. What is Capital Gain?

Capital gain is the potential profit earned when an investor sells SBN on the secondary market at a price higher than the purchase price. This feature applies to tradable series such as ORI and SR.
Conversely, if sold at a price lower than the purchase price, a capital loss occurs.

4. What is Yield to Maturity (YTM)?

Yield to Maturity (YTM) is an estimate of the annual rate of return an investor will receive if they hold SBN until maturity. The YTM calculation includes the coupon received and the difference between the purchase price and the nominal value at maturity.

5. What is Yield?

Yield is the rate of return obtained from an investment in the form of a percentage. In bonds or SBN, the yield may differ from the coupon because it is influenced by the purchase price on the secondary market. If the bond price falls, the yield usually rises, and vice versa.

6. What is Tenor?

Tenor is the investment period from issuance to maturity. For example, a 3-year tenor means that investors will receive their principal repayment in the third year.

7. What are Primary and Secondary Markets?

•    The Primary Market is the period when SBNs are first offered by the government to investors.
•    The Secondary Market is where investors can buy and sell SBNs after the offering period ends (for tradable series such as ORI and SR).

8. What is Floating with Floor?

Floating with floor is a floating coupon system that has a minimum limit. This means that if the benchmark interest rate rises, the coupon may increase, but if the interest rate falls, the coupon will not be lower than the minimum limit set at the time of issuance.

9. What is Nominal Value?

The face value is the principal amount of the investment that will be returned at maturity. For retail SBNs, purchases typically start at Rp1 million and its multiples according to the series specifications.
Well, after reading the information above, hopefully your understanding of SBN products is now clearer. It is important for investors to align their investment choices with their respective goals and risk profiles.

Bank Mayapada, as a Sub-Distribution Partner, offers Retail Government Securities (SBN) online. Further information can be found on the official Bank Mayapada Retail SBN page at https://www.bankmayapada.com/id/produk/investasi/sbn-ritel.