Global bond more than twice oversubscribed: Government
Global bond more than twice oversubscribed: Government
Urip Hudiono, The Jakarta Post, Jakarta
Patience does pay. Waiting for just the right moment to enter the
market, the government sold on Wednesday US$1 billion worth of
sovereign bonds, having previously delayed the offering amid
unfavorable market conditions.
In an announcement made on Thursday of the sale, Minister of
Finance Yusuf Anwar said the bonds were more than twice
oversubscribed, drawing in offers of up to $2.2 billion from over
200 investors during its 36-hour book-building process.
"The sale was successful as it was carefully planned and done
in a timely manner," he said.
Some 54 percent of the deal, which is the first global bonds
sale by an emerging market issuer since last month, went to Asian
investors, 28 percent to Europe and 18 percent to the U.S.
Banks and fund managers took 38 percent each, insurers 14
percent, while the remaining went to individual investors.
The sale of the bonds, which will mature on April 20, 2015,
was managed by Citigroup, Deutsche Bank and UBS Investment Bank.
Yusuf added that the 10-year bonds carried a coupon rate of
7.25 percent and a yield-to-maturity -- or an effective interest
rate that the government has to pay to investors -- of 7.375
percent.
With such a yield, the bonds will have a spread of 302 basis
points -- or 3.02 percent -- above the 10-year U.S. Treasury
bonds, which currently carry a yield of 4.36 percent. It is also
higher than the 6.85 percent yield on the $1 billion worth of 10-
year global bonds the government sold March last year.
Wednesday's global bonds sale is Indonesia's third, after last
year's $1 billion and a $400 million maiden overseas bonds issue
in 1996.
The government initially planned to hold the global bonds sale
last month but then postponed it as global market recently
slumped due to soaring oil prices and the U.S. Federal Reserve's
hiking of its benchmark interest rates, making investors more
interested to put their money in U.S. Treasury bonds.
Commenting on whether the yield would be too costly for the
government, head of the ministry's fiscal analysis department,
Anggito Abimanyu said that the issue was "relative", considering
the current yield of the U.S. Treasury bonds.
"We then have to calculate the spread and risk premium that
investors are asking for our bonds," he said, adding that
Indonesia's bonds had a relatively better spread compared to
global bonds from other countries.
Data from the ministry shows that similar bonds issued by the
Philippines and maturing in 2015 have a spread of 436 basis
points, while Peru has 329 basis points. Meanwhile, global bonds
issued by Brazil, Colombia and Venezuela -- all maturing in 2014
-- carry a spread of 457, 435, and 433 basis points,
respectively.
Market analysts have said that the ideal spread for
Indonesia's global bonds should be somewhere around 2 percent,
making it still attractive for investors but not too costly for
the government.
Meanwhile, head of the ministry's debt portfolio management
unit Rachmat Waluyanto said the proceeds from the global bond
would help provide an adequate supply of foreign currency to the
country, apart from helping plug this year's state budget
deficit.
The government plans to issue Rp 43 trillion in domestic and
global bonds this year. With Wednesday's sale, the government has
issued Rp 17 trillion worth of bonds thus far this year.