Frequently Asked Questions
 
What is the Securities Price Assessment Institute (LPHE)?
LPHE or Securities Pricing Agency (SPA) is a Party that conducts price assessments on debt securities, Sukuk and other securities to set fair market values.
 
What is LPHE function?
LPHE conducts fair market pricing activities of debt and Sukuk securities objectively, independently, credibly, and accountable thus enabling investors to assess their investments.
 
What does neutrality mean for the market?
LPHE must not be controlled by one party to ensure the results of its assessment are not biased. Bapepam and LK regulations require restrictions on the ownership structure to affect no interest of one party.
 
What is the meaning of a fair judgment?
When a price occurs from a trade, a fair valuation is generated from the price observation that arises during the transaction. Fair value reflects the reference price as a price guide when selling bonds.
 
Why is a fair judgment needed?
Bonds have a significant percentage of investment from the Investment Manager. Investors need to know the value of their bonds to make investments and risk management decisions appropriately. This will be a problem when there is no Mark to Market price.
 
What is Marked to Market?
MTM is assessing investments against market prices. So the value of the investment reflects the asset's value when released, For example, knowing the fair price when it will be sold.  MTM practice is a globally accepted method for conducting investment assessments and meeting accounting standards and risk management requirements.
 
Why does price for bonds unavailable?
Because the bond market transaction is OTC, so no closing price is officially issued for the bond. This contrasts with instruments traded, such as stocks whose the Exchange issues daily closing price.
 
How are bonds assessed in advance, and what are the impacts?
Due to the lack of specific assessment sources, the assessment of bonds is far from reasonable by involving simple estimation, interpolation and extrapolation in the absence of consistency of studies and methodologies.
If the bond is assessed with a simple estimate, then it is perilous because the bond will be very large / smaller than its fair value. With the development of an increasingly complex bond structure, the approach will not be adequate. Also, the lack of consistency and methodology so that the assessment is very detrimental and manipulative.
 
How does LPHE solve the above problems?
By issuing a fair valuation through a consistent methodology for all bonds in the market. LPHE will provide a reference price for all investors to assess their securities.
 
Do other countries have LPHE?
LPHE is present in fast-growing markets such as Korea, Mexico and Malaysia. In developed markets such as America, specialist companies conduct securities assessments, and their valuation results are used by investors who voluntarily comply with company regulations, public interest protection, and accounting report requirements.
 
Why doesn't Indonesia follow America?
Indonesia's bond market is still growing, so maturity levels have not been reached, as is the fair assessment of voluntary interest in America.
 
How does LPHE get a fair assessment?
LPHE produces assessments through a consistent and transparent methodology using data, trade observations, rating information, past behaviour, yield curve and financial data. With this methodology, a fair valuation can be generated for each bond daily, even if the bond is illiquid and ungated.
 
What is the methodology that LPHE uses to conduct reasonable assessments?
The methodology is based on a generally accepted bond assessment model and is consistent with practices in developed markets. Bapepam and LK approve all methods to ensure transparency, contingency and manipulation-free. In addition, Bapepam and LK require LPHE to have standards to control and safeguard data and feedback mechanisms from market participants to respond to such assessments.
 
Will LPHE affect trading?
In fact, with the reference price for illiquid and untraded bonds, market participants will have the reference price to start trading the bonds. LPHE acts as a catalyst to increase trading volume.
 
Who is the LPHE service user?
All parties who invest in Rupiah bonds need a source whose investment assessment is independent, consistent and verifiable. From a broad perspective, participants will get a relevant range of services provided by LPHE.
 
What other benefits does LPHE provide?
Due to the nature of its scope of work, LPHE is a comprehensive data store for all bonds. LPHE has a database of trade, credit, emissions, information facilities, yiled curve, statistics, issuers, public offerings and so on for the current period and historical. This database has great value as a source of information for all market participants and is available to clients as a plus. Such benefits are easy and available to the market, so that trading will be more active, prices will be better and support optimal risk management and capital allocation.
 
What is Fair Yield?
Fair yield is a fair yield that is determined based on all transactions in the market where there is a filtering process in the determination of the fair yield.
 
Government yield data contained in the PHEI Website, is what data?
Government yield data on the PHEI website is fair yield data obtained from transactions that occurred on that day, not from the last bid or last offer.
 
What is Credit Spread Matrix?
Credit spread matrix is a matrix that describes the difference / spread yield between risk free yield (SUN yield) and corporate bond yield with a certain rating. PHEI assigns Credit Spread for each corporate bond rating in the Investment Grade category (AAA to BBB-)..
 
What is Yield?
Yield, yield or return that investors expect when investing in bonds
 
What is IGSYC?
IGSYC (Indonesia Government Securities Yield Curve) is a Yield Curve of Indonesian Government Bonds issued by PHEI daily.
 
What is Yield Curve?
Yield curve is a line that describes the relationship between interest rate/yield to maturity time of a set of bonds that have the same credit quality/rating, but have different maturity times.
 
What is Yield to maturity?
Yield to maturity is the return to be obtained from bond investments taking into account aspects of bond prices, interest rates (coupons), as well as the time until.