Govt caps year with Rp 500b bond sale

The Jakarta Post, Jakarta

The government has wrapped up its bond issuance program for this year with the sale on Tuesday of Rp 500 billion (US$50 million) worth of bonds.

The Ministry of Finance's Director General of the Treasury, Mulia Nasution, said the 15-year bonds carried a weighted average yield of 14.63 percent and were more than 5 times oversubscribed.

The yield is higher than the 11.59 percent on the Rp 1.05 trillion worth of bonds that the government had issued in June, but lower than the 15.96 percent yield for the Rp 1.56 trillion worth of 13-year bonds during its last bond sale in August.

"This is our last bond offering for this year," Mulia said.

"And the results were very satisfying, considering the fact that 80 percent of the bidders were foreign investors."

In an open auction, the government received a total of Rp 2.69 trillion bids from investors requesting yields ranging from 14.59 percent to 17.5 percent.

The fixed-rate bonds would be payable twice a year in every May and October, and would mature on Nov. 15, 2020, with a coupon rate of 11 percent.

Rating agencies still designate Indonesia's bonds as high- risk, high-yield junk bonds.

Standard & Poor's rates Indonesia's long-term rupiah debt BB, or two levels below investment grade, while Moody's Investors Service rates it B2, or five levels below investment grade.

Local currency bonds have declined in the past months, driving yields higher, after the central bank raised its benchmark BI Rate by 2.5 percentage points to 11 percent over the past three months to contain inflation and defend the rupiah.

The government had planned a total of Rp 43.3 trillion in bond issues this year to help plug the state budget deficit. Not all of the proceeds of the bond sales will be used for the budget, however, as the government will buy back Rp 21 trillion in bonds as part of its debt rescheduling strategy.

With Tuesday's sale, the government has so far collected some Rp 26 trillion in net bond sale proceeds, Mulia said, expressing the hope that it would be able to a gain surplus of some Rp 800 billion by the end of the year.

Although it has wrapped up its bond sales for the year, the government is expected to repurchase some Rp 3 trillion in bonds next month.