With a 5.85% Coupon, is ORI014 Attractive to Investors?

From September 29 to October 27, 2017, the Indonesian government offered the Retail State Bond/ORI014. This three-year ORI offered a coupon rate of 5.85 percent to retail investors. Besides the coupon, investors could potentially profit from price differences upon resale, and, importantly, ORI014 is government-guaranteed. Following Indonesia's upgrade to investment grade, the government offered this ORI coupon at its lowest level yet.

Data from the Indonesia Bond Pricing Agency (IBPA) shows that the yield on government bonds (SUN) with a similar tenor on Friday, September 29th, was at 6.065 percent. This is higher than the coupon offered on ORI014. Furthermore, the interest rate for bank deposit guarantees by the Indonesian Deposit Insurance Corporation (LPS) is 6 percent. This means that holders of large sums of money can still negotiate deposit interest rates above the coupon offered on ORI014.

In addition, the potential for profit in the stock market remains quite attractive. Year-to-date (YTD) in 2017, the Jakarta Composite Index (IHSG) recorded an increase of 11.41 percent to 5,900. The potential profit in the stock market is also significantly higher than the ORI014 coupon. So, is ORI014 attractive to investors?