After Underlying Repo, SMF Bond Fund Fees Potentially Drop

JAKARTA - Head of the Economic Research Division of PT Sarana Multigriya Finansial (Persero) Martin D. SiyaranamUAL said that SMF bond funds have the potential to decrease after the company's bonds can be used as an underlying repo at Bank Indonesia.

This allows PT SMF to increase the leverage for financing Housing Financing Liquidity Facilities (FLPP).

"When our cost of funds come down and it's related to FLPP, we can leverage or leverage FLPP bigger," Martin said, quoting Antara.

He explained that when SMF bonds are increasingly accepted by investors and markets, the company's need to provide high returns can be reduced.

He gave an example, the spread of SMF bond yields for SBN is in the range of 100-150 basis points (bps). With the repo facility, SMF can offer lower spreads, for example around 80 bps. This decline in spread directly reduces the company's funding costs.

With lower funding costs, SMF's ability to increase FLPP's companion portion has also increased.

To note, currently SMF provides a 25 percent portion of complementary funds for FLPP mortgage financing. The decrease in funds ultimately has the potential to boost the volume of subsidized mortgage distribution.

He added that the repo facility also encourages long-term bond market liquidity. Investors who were previously less interested in tenors of 10, 15, to 20 years, are now more open to buying long-term bonds because SMF bonds can be recovered to Bank Indonesia.

"With the SMF bonds being used as an underlying repo, banks know they can get fast liquidity. This helps maintain financial liquidity stability and liquidity adequacy ratio," he explained.

For information, BI has a number of criteria for securities that can be accepted as underlying, including high-quality liquid assets (HQLA).

SMF Business Director Heliantopo said that access to repo will increase investor interest in buying SMF bonds because they have liquid exit operations.

He reminded that the national housing program of 3 million houses requires large liquidity. So the SMF bonds that can be underlying repo are expected to facilitate the circulation of funds and increase the volume of distribution of FLPP mortgages.

As for now, said Heliantopo, securities that can be recovered in BI only cover conventional and sharia SMF bonds.

Meanwhile, Asset Wearing Effects (EBA), limited quantity and liquidity are obstacles. However, SMF hopes that EBA can be used as an underlying repo in the future if liquidity and quality are adequate.

As previously reported, the plan to expand the underlying repo was revealed by BI Governor Perry Warjiyo in a press conference on the results of the BI Board of Governors' Meeting (RDG) in October 2025, Wednesday (22/10).

Perry said the central bank continues to strengthen the pro-market monetary operations strategy, one of which is expanding the underlying repo with other high-quality securities issued by financial service institutions formed or established by the government.

However, at that time Perry had not explained further about the definition of the 'high-quality securities' in question.

Furthermore, on Friday (7/11), BI announced that the expansion of the underlying repo includes corporate bonds issued by SMF. The implementation of this underlying expansion will begin on November 10, 2025.

Head of the BI Monetary and Securities Asset Management Department (DPMA) Group Fitra Jusdiman said that so far, BI repo instruments generally use State Securities (SBN) as collateral. In fact, there are various types of securities that also have high quality and adequate liquidity.

BI also stipulates a number of criteria for securities that are said to be of high quality that can be accepted as underlying, including high ranking, can be traded, actively traded for a certain period, recorded in OM participant accounts, and not being installed.

The bonds issued by SMF are considered to meet all these criteria, so they are used in the early stages of implementing this policy. In the future, BI opens the possibility to receive other corporate bonds that have equal quality.