Government issues Rp 4 trillion bonds

The Jakarta Post, Jakarta

The government sold some Rp 4 trillion (US$440 million) worth of bonds on Tuesday, which was higher than the initial plan of Rp 3 trillion due to strong demand.

The seven-year bonds were sold at a weighted average yield of 10.88 percent, the Ministry of Finance said in a statement.

The government received a total Rp 5.4 trillion in bids, in what market observers said was due to strong demand, particularly from banks seeking higher return for their excess funds.

The government had been issuing bonds for the past several months in a bid to raise cash to help finance the 2004 state budget deficit and redeem maturing bonds, issued in the wake of the late 1990s financial crisis.

So far it has issued around Rp 21.75 trillion bonds this year, out of the total target of Rp 23 trillion. The government will sell the last bond issue for this year on Nov. 30.

Moody's Investors Service rates Indonesia's local-currency debt B2, while Standard & Poor's assigns a ranking of B plus. Both are junk, or high-yield, high-risk designations.

The government's bond issue has largely received strong response from investors thanks to the country's improving macroeconomic indicators. The successful general election has further improved sentiment in the country as political risk coming from the election has been eliminated.