Bonds are often perceived as relatively stable investment instruments. However, their level of risk and characteristics are highly determined by the issuing party. Understanding these differences is the first step in building a portfolio aligned with your risk profile.
Indeed, bond types are influenced by the issuer. Let us explore who is authorized to issue bonds and what the implications are for your portfolio risk.
What Is a Bond Issuer? A bond is a medium- to long-term debt instrument issued by certain entities, such as governments, state-owned enterprises (SOEs), or private companies. This debt security represents a formal agreement between the investor and the issuing party. Its function is to acknowledge debt and provide interest payments at a predetermined rate.
A bond issuer is the party that issues the bond or debt instrument. The issuer essentially borrows funds from investors and is obligated to repay the principal at a specified maturity date.
It is important to note that the issuer plays a significant role in determining both the risk level and the returns investors may receive. The issuer determines the interest rate or coupon that investors will earn. Therefore, potential profit is heavily influenced by the type of bond issuer.
In addition, the issuing party significantly affects investment risk. Government bonds generally carry the lowest risk, while corporate bonds issued by private companies are considered to have the highest risk.
Government as a Bond Issuer Let us first discuss government bonds, which are issued directly by the state. In this case, the government acts as the issuing party, and the funds raised are typically used to finance the national budget.
There are several types of government bonds issued, including ORI (Retail Government Bonds), FR (Fixed Rate bonds), and SBR (Retail Savings Bonds).
Government bonds are considered relatively low risk because both principal and coupon payments are guaranteed by the state under applicable laws. Coupon payments are also made on a scheduled basis.
This type of bond is highly suitable for conservative to moderate investors, including high-net-worth individuals (HNWIs).
The Role of SOEs in Issuing Bonds State-owned enterprises (SOEs) also play a role in bond issuance. The purpose of issuing bonds by SOEs includes funding, infrastructure investment, business expansion, and debt refinancing.
Compared to government bonds, SOE bonds carry higher risk. Their risk profile generally falls between government and private corporate bonds, depending on the financial condition and strategic importance of the SOE.
Examples of SOEs that issue bonds include BRI, Hutama Karya, Waskita Karya, and many others.
Bonds issued by SOEs are generally more suitable for moderate investors, as their risk remains higher than that of government bonds.
Private Companies Issuing Bonds In addition to governments and SOEs, private companies also issue bonds. The objective is similar: to obtain funding from investors for corporate development.
Corporate bonds carry the highest risk among the three categories mentioned above. Their risk level exceeds that of both government and SOE bonds, which means investors must carefully assess the issuer’s credit quality and financial fundamentals.
If you intend to invest in bonds issued by private companies, it is essential to evaluate several factors, including financial performance, industry outlook, credit ratings, and overall business stability.
Read Also: 7 Reasons Government Bonds Are Suitable for Conservative Investments
Key Differences Between Government, SOE, and Corporate Bonds Before selecting which bond best aligns with your investment objectives, it is important to understand their differences:
Key Aspect
Government Bonds
SOE Bonds
Corporate Bonds
Issuer
Issued directly by the state through the Ministry of Finance of the Republic of Indonesia
Issued by state-owned enterprises under the Ministry of SOEs
Issued by private companies (banks, property developers, manufacturers, etc.)
Risk Level
Lowest, supported by the state
Medium risk, depending on SOE business health
Highest, highly dependent on the company’s financial condition
Return (Coupon)
Generally lower but stable
Usually higher than government bonds
Typically highest as compensation for higher risk
Source of Payment
State budget (taxes and national revenue)
SOE company revenue and cash flow
Private company profits and cash flow
Investor Safety Perception
Considered the safest in the domestic market and supervised by the Financial Services Authority (OJK)
Considered relatively safe but still subject to business risk
Dependent on the issuer’s reputation and credit rating
How Investors Purchase Bonds from Different Issuers Beyond understanding issuer characteristics, investors should also be aware of the purchasing mechanisms for bonds issued by each type of issuer. Each bond category has distinct purchase channels and market characteristics.
The process of purchasing bonds differs depending on the issuer. Government bonds are generally available for retail purchase in the primary market through official distribution partners, such as banks and digital investment platforms, with relatively affordable minimum investment amounts.
Meanwhile, SOE and corporate bonds are typically offered through limited primary market placements or traded in the secondary market. Therefore, investors need to consider liquidity, credit ratings, and the issuer’s risk profile.
Understanding these purchase channels helps investors align their strategy with investment objectives, time horizon, and risk tolerance, while optimizing potential returns in a more structured manner.
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Through DBS Treasures, bond investing becomes more convenient and confident. Bonds provide regular coupon payments as relatively stable passive income and offer potential capital gains when sold at higher market prices. As fixed-income instruments, bonds may also provide competitive coupon rates that generally exceed average deposit interest rates, offering potentially more optimal returns.
DBS Treasures offers a comprehensive selection of government Fixed Rate (FR) bonds with coupon structures aligned with prevailing regulations. The fixed and scheduled coupon characteristics make FR bonds a stable foundation in medium- to long-term asset allocation strategies.
Investors also gain ease in structuring bond investment strategies aligned with financial objectives and risk profiles. Bond series selection is conducted selectively by considering coupon structure, tenor, and market conditions, ensuring that bonds play an optimized role within the portfolio.
All investment processes can be conducted digitally through the DBS digibank App, including Single Investor Identification (SID) registration and buy and sell transactions in the secondary market efficiently and transparently.
In addition, you will be supported by curated market analysis from financial experts delivered proactively. Bond opportunity recommendations are tailored to your portfolio needs and risk profile, powered by Artificial Intelligence and Machine Learning (AI-ML). These insights are complemented by curated solutions for investment (Grow) and insurance protection (Protect), enabling you to make investment decisions more confidently through your preferred communication channels.
Position bonds as part of a measurable long-term asset allocation framework. For strategy-based guidance, from planning and instrument selection to periodic portfolio evaluation, DBS Treasures can serve as a relevant partner.
