Global bond more than 4 times oversubscribed

Urip Hudiono, The Jakarta Post, Jakarta

The government struck gold in its second overseas bond sale for the year, managing to reap as much as US$1.5 billion as strong investor demand for Indonesia's emerging bond market dwarfed concerns over the recent bombings in Bali.

Announcing the results of the double-tranched bond sale on Thursday, Minister of Finance Jusuf Anwar said the government had raised a total of $900 million from its offering of 10-year bonds, and $600 million from Indonesia's first-ever 30-year bonds.

The bonds, Jusuf further said, were more than four times oversubscribed, drawing in a total of $4.25 billion worth of bids from 386 investors during the 36-hour book-building process, which ended late on Wednesday.

"This (the results of the sale) reflects the international community's strong confidence in the long-term prospects of Indonesia's economy," he said, adding that the proceeds will be used to finance the state budget deficit as well as strengthen the country's foreign exchange reserves.

Investors from Asia snapped up 40 percent of the 10-year notes on offer, followed by European investors taking 31 percent and U.S. investors 29 percent. Similarly, 38 percent of the 30-year papers was sold to Asian investors, 33 percent to European investors, and 29 percent to U.S. investors.

Merrill Lynch's head of Asia investment banking, Sheldon Trainor, said as well that Wednesday's deal reflected the market's approval of both the government and the central bank's recent policy decisions for the improvement of the economy.

The New York-based fund manager, together with Citigroup and Credit Suisse First Boston, had arranged Wednesday's bond sale.

The government had initially expected to raise between $1 billion and $1.25 billion from the bond sale.

The strong market appetite has prompted the government to consider launching more global bond sales in the future.

"We may offer the 30-year bonds if the market price is suitable," Jusuf said, without elaborating on a detailed time line.

Wednesday's global bonds sale was Indonesia's fourth, after April's and last year's, which were both priced at $1 billion, and a $400 million maiden overseas bonds issue in 1996.

The 10-year bonds, which will mature on Jan. 15, 2016, carry a coupon rate of 7.5 percent and were priced to yield at 7.625 percent, while the 30-year bonds, which will mature on Oct. 12, 2035, carry an 8.5 percent coupon rate and were priced to yield at 8.625 percent.

With such yields, the bonds will have a spread of 3.29 percent and 4.06 percent, respectively, over the comparable 10-year and 30-year U.S. Treasury bonds.

Meanwhile, the finance ministry's Director General of the Treasury, Mulia Nasution, said the government may also consider using the excess liquidity from the proceeds to help refinance maturing bonds.

With the sale, government proceeds from bond sales have already reached Rp 46.5 trillion, more than the Rp 43.3 trillion it had earmarked in the state budget from both local and overseas bonds this year.