Government to issue Rp2.7t in bonds next week<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government is set to go ahead with its plans to auction
\nsome Rp 2.7 trillion (about US$300 million) worth of bonds on
\nApril 8.<\/p>\n
The Ministry of Finance said in a press release on Friday that
\n42 banks, securities and brokerage firms had been selected to
\nparticipate in the auction.<\/p>\n
Most of the participants are banks including ABN-Amro Bank,
\nBank Buana Indonesia, Bank Central Asia (BCA), Citibank, Deutsche
\nBank, Standard Chartered Bank, Bank Mandiri and Bank Lippo.<\/p>\n
The eight-year bonds, the release said, will mature on Sept.
\n15, 2011 and carry a fixed interest rate, to be determined on the
\nauction day based on bids from the appointed participants.<\/p>\n
The bonds will be used to help refinance maturing government
\nbonds. The government has said it would issue a total of Rp 7.7
\ntrillion worth of bonds this year. It is still not yet clear when
\nthe government will issue the next batch of bonds.<\/p>\n
Analysts have predicted that the market would fully and
\nquickly absorb the bonds, whose coupon rate is expected to be
\nslightly above the weighted average interest rate of Bank
\nIndonesia one-month promissory notes, currently standing at 11.40
\npercent.<\/p>\n
Government bonds have become the center of investors'
\nattention nowadays as they were deemed as more profitable and
\nsafer to invest in compared to other options.<\/p>\n
While the country's equity market has been in the doldrums,
\nmaking it less attractive for investors, investing in the real
\nsector would carry an even higher risk of suffering losses,
\nanalysts have said.<\/p>\n
Investing in bank deposits is not so attractive either amid
\ndeclining interest rates as Bank Indonesia has been trying to
\nguide its benchmark interest rate lower since early last year.<\/p>\n
All these have made investing in the country's bond market
\nmore attractive than ever. The fact that government bonds carry
\nzero risks of defaulting make them even appealing to invest in.<\/p>\n
The government has said that the issuance of new bonds to
\nrefinance the matured ones was part of attempts to manage the
\ncountry's huge public debts. Without refinancing, the government
\nwill risk sending the country into a fiscal disaster, in the
\nevent of defaulting.<\/p>\n
As of December last year, the country's domestic debts stood
\nat Rp 650.4 trillion -- all in the form of bonds, with a large
\nchunk of them maturing between 2004 and 2009.<\/p>\n
Of the total domestic debts, local banks received most of them
\nwith some Rp 430 trillion worth of recapitalization bonds, while
\nBank Indonesia obtained another Rp 144 trillion in bonds to
\nreplace an equal amount it had spent under the liquidity support
\nloans (BLBI).<\/p>",
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