Government won't cancel bond issue: Official

The Jakarta Post, Jakarta

The government will proceed with plan to issue between Rp 2 trillion (US$215.05 million) and Rp 3 trillion worth of bonds later this month despite the latest major bombing.

"The plan is still on track," Herwidayatmo, a member of the government's bond management committee, told reporters on Friday.

A suicide car bomb exploded outside the Australian Embassy on Thursday, killing at least nine people and injured more than 180. The stock market and the rupiah plunged following the incident, although both stocks and the local unit quickly recovered.

Herwidayatmo was also optimistic that investor interest on the government bonds, to be put on auction on Sept. 28, would remain high.

The government is expected to decide on the size of the bonds next week.

Some analysts said although many investors now realize that terror attacks are part of the risk of investing in financial markets in countries like Indonesia, the latest incident would prompt investors to ask for higher yields in the upcoming bond auction.

In May, the government canceled a sale of Rp 3.5 trillion bonds because investors demanded overly high yields at a time when many investors switched to dollar-based assets because of the expected rise in U.S. interest rates.

Last month, the government issued Rp 3 trillion bonds at a weighted average yield of 11.74 percent.

The government, via the Ministry of Finance, plans to issue bonds monthly to raise a total Rp 28 trillion this year mainly to finance maturing bonds, which were issued during the late 1990s to bailout ailing banks.