Experts see strong interest in govt bonds

The Jakarta Post, Jakarta

The government said over the weekend it was planning to sell some Rp 2.5 trillion worth of sixth government domestic bonds on Sept. 28, in what an analyst said as timely, given the positive sentiment to be derived from Monday's election runoff.

The upcoming issue is expected to draw healthy interests from investors, notably from domestic investors, according to Fauzi Ichsan, an analyst at Standard Chartered Bank .

The government said in a press statement that it would auction the bonds, which carry a fixed coupon rate of 11 percent, and will mature on Oct. 15, 2014.

"After the election, where the uncertainty has been reduced, investors -- rather than keeping their money on time-deposits or SBI (Bank Indonesia promissory notes) -- they would instead return to the bond market for a higher gain.

"So, I think the upcoming bond issue would draw a healthy response from investors, with sentiment from the election offsetting that of the bomb blast recently," Fauzi said in reference to a powerful bomb attack in front of the Australian embassy.

Fauzi was defying rising concerns that the high-powered blast, which has so far killed nine people and injured more than 180, would serve as an excuse for investors to ask for a higher yield.

He was pointing as an example how Jakarta's market, both capital and currency, had staged a quick recovery only a day after the blast.

Incumbent President Megawati Soekarnoputri, who has taken up the current administration for about three years, will on Monday compete head-on with her former chief security minister Susilo Bambang Yudhoyono.

Fauzi cannot predict a yield that could be priced in the next bond issue.

In the last bond offering on Aug. 24, the government sold Rp 3 trillion of 10-year bonds at a weighted average yield of 11.74 percent. It was the first time the government has issued a 10- year bond -- previously it has only issued seven or eight-year bonds.

In the past years, the government has been issuing bonds to raise fresh funds to plug the budget deficit, whose financing ability has been heavily limited by huge payments of debts -- mostly domestic ones.

The deficit has been estimated at Rp 24.4 trillion, or about 1.2 percent of gross domestic product.

Of the total Rp 32.5 trillion worth of bond issues planned for this year, it has so far auctioned just above Rp 14 trillion worth of domestic bonds, in addition to $1 billion in dollar- dominated sovereign bonds.

Bond issues as of Aug. 24 -------------------------------------- Auction Bond size Bids received -------------------------------------- Feb. 24 Rp 2.53t Rp 5.3t March. 16 Rp 2.00t Rp 5.7t April 27 Rp 3.00t Rp 9.9t July 27 Rp 3.50t Rp 6.3t Aug. 24 Rp 3.00t Rp 3.7t -------------------------------------- Source: Ministry of Finance