BI to name bond market makers next month
BI to name bond market makers next month
JAKARTA (JP): Over five foreign and local financial entities
have expressed interest in becoming market makers of the
government's bonds, according to Bank Indonesia's senior
official.
Bank Indonesia deputy governor Miranda S. Goeltom said on
Thursday the central bank expected to appoint several of the
short-listed candidates in April.
"We should have picked them last month but we decided to give
the selection more consideration," Miranda told reporters on the
sidelines of a seminar on Bank Indonesia's position in the
economic and political discourse, organized by the Institute for
the Study of Business Etiquette in Indonesia (Lspeu).
Miranda declined to mention the candidates' names, but said
the interested financial entities included foreign and local
banks as well as securities firms.
The government has so far issued bonds worth Rp 282 trillion
to finance the recapitalization of the country's ailing banks.
The tradable bonds currently total Rp 255 trillion. In the
first stage, the central bank only allowed 10 percent of the
tradable treasury bonds, or Rp 25.5 trillion, to enter the
secondary market. But the response from the market was
disappointing.
Miranda said she hoped the appointment of market makers would
be able to incite bond trading activities.
Bank Indonesia was looking for market makers who were
financially strong, had sound management teams and owned good net
workings.
She said it was preferable to have a mix of local and foreign
market makers consisting of banks and non-bank entities alike.
"The appointment of market makers should create a competitive
market environment that would benefit bond prices on the market,"
she said.
Miranda said market makers needed privileges to make active
bids and offers, capable of short-selling, meaning to place a bid
although lacking in funds.
"This is common practice in other countries, but our law here
forbids the central bank from channeling credits onto the
secondary market," she said.
Miranda said the central bank was still looking at ways of how
to create active market makers without breaking the law.
Furthermore, the Indonesian market was not fully prepared for
treasury bonds trading, she said.
"In markets such as the United States, the infrastructure and
market environment are already developed; players know how to
calculate yields and risks," she said.
She estimated it would take about a year to have a liquid
Indonesian market for treasury bond trading.
Commenting on the recent hike in the salaries of civil
servants, Miranda said it would not affect Bank Indonesia's money
policy as yet.
Inflation would certainly rise, Miranda said, but added she
saw no reason to tighten the money flow unless inflation rose due
to underlying monetary factors.(bkm)