Government to issue Rp2.7t in bonds next week
Government to issue Rp2.7t in bonds next week
Dadan Wijaksana, The Jakarta Post, Jakarta
The government is set to go ahead with its plans to auction
some Rp 2.7 trillion (about US$300 million) worth of bonds on
April 8.
The Ministry of Finance said in a press release on Friday that
42 banks, securities and brokerage firms had been selected to
participate in the auction.
Most of the participants are banks including ABN-Amro Bank,
Bank Buana Indonesia, Bank Central Asia (BCA), Citibank, Deutsche
Bank, Standard Chartered Bank, Bank Mandiri and Bank Lippo.
The eight-year bonds, the release said, will mature on Sept.
15, 2011 and carry a fixed interest rate, to be determined on the
auction day based on bids from the appointed participants.
The bonds will be used to help refinance maturing government
bonds. The government has said it would issue a total of Rp 7.7
trillion worth of bonds this year. It is still not yet clear when
the government will issue the next batch of bonds.
Analysts have predicted that the market would fully and
quickly absorb the bonds, whose coupon rate is expected to be
slightly above the weighted average interest rate of Bank
Indonesia one-month promissory notes, currently standing at 11.40
percent.
Government bonds have become the center of investors'
attention nowadays as they were deemed as more profitable and
safer to invest in compared to other options.
While the country's equity market has been in the doldrums,
making it less attractive for investors, investing in the real
sector would carry an even higher risk of suffering losses,
analysts have said.
Investing in bank deposits is not so attractive either amid
declining interest rates as Bank Indonesia has been trying to
guide its benchmark interest rate lower since early last year.
All these have made investing in the country's bond market
more attractive than ever. The fact that government bonds carry
zero risks of defaulting make them even appealing to invest in.
The government has said that the issuance of new bonds to
refinance the matured ones was part of attempts to manage the
country's huge public debts. Without refinancing, the government
will risk sending the country into a fiscal disaster, in the
event of defaulting.
As of December last year, the country's domestic debts stood
at Rp 650.4 trillion -- all in the form of bonds, with a large
chunk of them maturing between 2004 and 2009.
Of the total domestic debts, local banks received most of them
with some Rp 430 trillion worth of recapitalization bonds, while
Bank Indonesia obtained another Rp 144 trillion in bonds to
replace an equal amount it had spent under the liquidity support
loans (BLBI).