Govt bond issue receives strong market demand<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government's first bond issue this year, worth Rp 2.7
\ntrillion (about US$295 million), was well received by the market,
\nwith the issue three times oversubscribed.<\/p>\n
Minister of Finance Boediono welcomed on Tuesday the market's
\npositive reaction, saying that it should indicate stronger
\ninterest on the part of investors in the domestic bond market.<\/p>\n
\"The strong demand reflects increasing investor interest in
\nthe country's secondary market as an alternative for investment,\"
\nhe told The Jakarta Post.<\/p>\n
The bonds carries a fixed coupon of 12 percent annually, with
\ninterest paid twice yearly, in March and September.<\/p>\n
The bond issue is the first batch in the government's plan to
\nissue a total of Rp 7.7 trillion-worth of bonds this year to help
\nrefinance maturing bonds. The refinancing measure is part of
\nefforts to ensure fiscal sustainability.<\/p>\n
As of December last year, the country's domestic debt stood at
\nRp 650.4 trillion -- all in the form of bonds, with a large chunk
\nmaturing between 2004 and 2009. Most of the bonds were issued to
\nbail out ailing banks during the banking crisis of the late
\n1990s.<\/p>\n
When asked as to the timing and extent of the next bond issue,
\nBoediono declined to give a clear reply, saying that such matters
\nhad yet to be decided.<\/p>\n
\"One thing is for sure; I'd prefer it in the form of T-Bonds
\nrather than the planned T-Bills. We'll discuss this with the
\nHouse later on,\" he added.<\/p>\n
Based on the agreement with the House of Representatives, of
\nthe total bonds to be issued this year, Rp 2.7 trillion would be
\nin the form of T-Bonds, with the remainder in the form of T-
\nBills.<\/p>\n
T-Bonds, or treasury bonds, are bonds that have a long-term
\nmaturity period, while T-bills are government bonds that mature
\nwithin six months to 12 months.<\/p>\n
\"We'll see where the discussion will direct us, but as far as
\nthe budget is concerned, it would create less of a burden if the
\nbonds were T-Bonds because of their longer period,\" Boediono
\nsaid.<\/p>\n
In December last year, the government also made a similar bond
\nissue, worth Rp 2 trillion, for the same purpose, and it was also
\noversubscribed three times.<\/p>\n
Analysts have said that government bonds have become an
\nattractive investment alternative amid a declining interest rate
\nenvironment and lower inflation.<\/p>\n
Investing in Bank Indonesia SBI promissory notes is no longer
\nattractive as the central bank has been guiding the interest rate
\nlower to around 11.40 percent now from over 17 percent in the
\nbeginning of last year.<\/p>\n
In addition, government bonds are deemed a safer investment.<\/p>\n
According to data from the finance ministry, as of February
\nthis year, as many as Rp 59.6 trillion-worth of state bonds were
\ntraded and held by investors, mostly banks, pension funds,
\ninsurance firms, etc.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-bond-issue-receives-strong-market-demand-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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