05 Jul 2022 | Edukatips

Types of Bond Investments and How to Get Them

*Update : 1 Mar 2024

In the capital market, besides buying stocks, investors can also buy bonds. Quoted from the official website of the Financial Services Authority (OJK), bond investment is intermediate and long-term securities that can be traded.

Bonds contain an embedded coupon or yield that will be paid by the bond issuer (debtor) to the buyer (creditor/investor) and the maturity date, under which the debtor is obliged to repay the par value to the investors.

These debt securities or bonds are issued by the government or corporations. In Indonesia, the issuer takes 1 to 10 years to repay the principal of a bond, making it an intermediate and long-term investment. Here are the types of bonds and their characteristics.

Types of Bonds

There are several types of bonds, which are classified based on the issuer, bond amounts, interest payment systems, and yields.

Bonds by the Issuer

1. Corporate Bond

A corporate bond is a debt issued by a company, either State-Owned Enterprises (SOEs) or private companies. Corporate bonds are further classified into fixed-coupon bonds, variable coupon bonds, and sharia-compliant bonds.

Corporate bonds are riskier than government bonds, but with higher risk, there is a higher return as well (high risk high return).

2. Government Bonds

A Government bond is a debt issued by the government of the Republic of Indonesia in the form of Government Securities (SBN). Generally, these bonds will be issued by the government every year.

Some of the SBN products include government bonds (SUN) with retail products such as Retail Government Bonds (ORI) & Retail Savings Bond (SBR), and non-retail SUN products such as Fixed Rate (FR) and INDON, which is a USD denominated Indonesian Government bond. 

Further, there are also products of State Sharia Securities (SBSN) or sukuk. Sukuk products also come in retail series, such as Retail State Sukuk (SR) and Savings Sukuk (ST), and non-retail series which include Project-Based Sukuk (PBS) and INDOIS, a USD-denominated bond.

3. Municipal Bond

Municipal bonds are debt securities issued by local governments with the goal of developing the local area.

Bonds by the Payment System

1. Coupon Bond

A coupon bond is a debt obligation that provides for the payment of a periodic coupon to the investors or bond lenders. The coupon amount has been set by the issuer.

2. Zero-Coupon Bond

A zero-coupon bond is a bond that pays no interest, which renders its profit from the difference between its purchase value (issued at a deep discount) and selling price. 

3. Fixed-rate Bond

Fixed coupon bonds offer bond investment with an interest rate that does not change over the life of the bond. 

For example, if the government sets an ORI coupon of 5.2% per annum, then you will get a yield of 5.2 % per month until it matures.

4. Floating-rate Bond

Floating-rate bonds offer a variable coupon rate that depends on the market index. The market index refers to the benchmark rates which means that the first coupon issued on a bond is the minimum coupon limit that remains valid until the bond reaches maturity.

Bonds by Coupon Period

1. 1-Month Coupon Bond

It is a bond whose coupon payments are made every month until it reaches maturity. Examples of this product include government bonds such as ORI, SBR & SR, with interest payable every month making it suitable for fixed-income investment with short-term needs.

2. 6-Month Coupon Bond

It refers to a bond whose coupon payments are made semiannual until it reaches maturity. Examples of this product include FR, PBS, INDON & INDOIS, with interest payable semiannually making it suitable for fixed-income investment with long-term needs.

Merupakan jenis obligasi dengan pembayaran kupon atau imbalan tiap 6 bulan hingga jatuh tempo produk. Contoh produk yang termasuk adalah FR, PBS, INDON & INDOIS yang dibayarkan tiap enam bulan sehingga cocok untuk dijadikan investasi pendapatan tetap dengan kebutuhan jangka panjang.

Bonds by the Management

1. Conventional Bond

Conventional bonds are bonds offered by governments or large corporations, through which the investors or lenders will buy bonds or debt securities from the issuer.

The purpose of issuing bonds is as additional funds to grow a company/state with a commitment to provide yields in the form of interest or coupons to the investors.

2. Sharia-compliant Bond

A sharia-compliant bond is a bond whose management is guided by sharia principles. This means that it can only be used for things that bring benefits or comply with Islamic law. This type of bond certainly does not contain usury. 

The yield will be paid periodically within a specified period.

Do You Want to Buy Bonds? Here’s the Place!

If you are interested in a bond portfolio, you should know where to invest. Bonds are sold in the primary and secondary markets.

Primary Market

In the primary market, you can invest in debt securities when they are first issued by the government or company. 

The main requirement for securities transactions in the primary market has been stipulated in the Capital Market, namely that the bonds must be listed on the stock exchange. In Indonesia, all bond transactions must be listed on the Indonesia Stock Exchange (BEI).

BCA offers primary market bonds issued by the government of the Republic of Indonesia, namely ORI, SR, SBR & ST.

Secondary Market

The secondary market is a place to trade bonds after they are issued and listed on the IDX.

One of the trusted places to transact bonds is BCA. To get it, simply download the Wealth Management app or Welma from BCA.

BCA offers IDR-denominated SUN and SBSN at the secondary market such as ORI, SR, FR & PBS, and USD-denominated bond instruments such as INDON & INDOIS. 

If you wish to sell tradable bonds at BCA, you can sell them directly at the secondary market through the Welma app. Your ORI, SR, and FR can be used as collateral for productive loans, with competitive and attractive rates. 

Although the bonds offered at BCA are government bonds whose payment is guaranteed by law, we still adjust the risk profile to the type of bonds we invest. Let’s learn and find out your risk profile before making an investment.

In addition to investing in bonds in the primary & secondary market, you can also find your risk profile, invest in mutual funds, and manage your portfolio on Welma. Get a Fee-Free Bond Transaction via Welma and cash back IDR 25 thousand for your first investment at BCA. What are you waiting for? Come on, download myBCA now!