Government feels heat of Fed rate hike<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
In another change of mind over its plans to offer up to US$1
\nbillion in bonds on the global market this month, the government
\nhas decided to temporarily postpone the sales amid rising
\ninflation and interest rates in the U.S. that could lead to an
\nincrease in the bonds' borrowing cost.<\/p>\n
\"We will not be offering the bonds in the immediate future. We
\nwill continue to monitor the market, and wait for the best time
\nfor us to enter the market,\" Minister of Finance Yusuf Anwar said
\non Thursday, without mentioning a specific timetable for the
\nissue.<\/p>\n
The remarks contradicted earlier statements that seemed to
\nexpress optimism about the planned bond issue schedule, with
\nofficials boasting about recent success in overseas \"roadshows\"
\nthat were used to gauge interest in international markets --
\ngiving rise to suggestions that the government might well auction
\nthe bond this week.<\/p>\n
The government claimed that the response from potential
\ninvestors was strong during the roadshows at Singapore, Hong
\nKong, New York and London.<\/p>\n
Prior to that however, the government had signaled a possible
\ndelay in the offering, in response to the recent nose dive in the
\nprice of bonds issued by U.S. auto giant General Motors, which
\nstaggered the world bond market.<\/p>\n
On Thursday, Anwar explained that although the roadshows were
\ndeemed as successful, the problem now is the prospect of rising
\ninflation in the U.S. and the recent interest rate increase by
\nthe U.S. Federal Reserve Bank.<\/p>\n
\"This means that if we go to the market now, our total cost of
\nborrowing will be higher,\" he said.<\/p>\n
The latest U.S. consumer price index (CPI) report indicated
\nthat inflation was picking up, forcing the Fed to raise its
\nbenchmark rate a quarter-point to 2.75 percent earlier this week.<\/p>\n
The situation has in turn pushed the yield on benchmark U.S.
\nbonds to as high as 4.69 percent.<\/p>\n
Market analysts have said that Indonesia's global bonds would
\nappear less attractive if its yield difference -- or spread --
\nwith U.S. bonds was above 2 percent, and the government would
\nhave to pay $80 million more for the bonds if they offered them
\nnow.<\/p>\n
Yusuf said that the spread for Indonesia's global bond is
\ncurrently at 2.35 percent.<\/p>\n
Along similar lines, Coordinating Minister for the Economy
\nAburizal Bakrie said the government would wait for prices in the
\nbond market to stabilize before conducting pricing for the bonds.<\/p>\n
The pricing was initially slated to take place on March 22.<\/p>\n
\"We expect to be able to obtain a yield of 6.85 or less for
\nour bonds,\" he said, referring to the yield that the government
\nmanaged to obtain during its sale last year of 10-year bonds
\nworth $1 billion.<\/p>\n
The government plans to offer bonds amounting to Rp 43
\ntrillion (about $4.6 billion) throughout the year, including
\ndollar-denominated bonds, whose sale will be managed by Citigroup
\nInc., Deutsche Bank AG and UBS AG.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-feels-heat-of-fed-rate-hike-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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