Govt issues Rp 3.75t bonds amid strong interest
Dadan Wijaksana, The Jakarta Post, Jakarta
The government sold Rp 3.75 trillion (US$405 million) worth of 10-year bonds on Tuesday, which was much greater than initially planned due to strong demand from investors.
The rupiah-denominated bonds were issued at a weighted average yield of 11.21 percent, lower than the 11.74 percent yield set for 10-year bonds issued in August -- in what a top government official said was another sign of investor confidence in the economy.
"Having been oversubscribed, and with a relatively competitive yield, it reflects confidence from the market," Anggito Abimanyu, the Ministry of Finance's head of Economic Analysis, Finance and International Cooperation (Bapekki) told reporters.
"It (confidence) was perhaps supported by the smooth election," he added, referring to last week's presidential run- off in which incumbent President Megawati Soekarnoputri was soundly beaten by her challenger Susilo Bambang Yudhoyono, although the government will not officially announce it until Oct. 5.
Pension funds, insurers, securities and investment firms were among the bidders, Anggito said.
The government initially planned to issue Rp 2.5 trillion in bonds, but as it drew bids up to Rp 7.1 trillion (almost three times oversubscribed) on Tuesday's bond auction, the Ministry of Finance increased the size of the issue.
"There is a lot of money floating out there in the market," driving demand for the bonds, said Dastin Mudijana, who helps manage $1.2 billion in fixed-income assets at PT Panin Sekuritas as quoted by Bloomberg. "Pension fund and insurance companies are bidding."
It was the second time the government issued a 10-year bond, longer than the usual seven or eight-year bonds.
Tuesday's issue brings the total domestic bonds issue this year to Rp 17.7 trillion.
The government has targeted to issue around Rp 23 trillion worth of rupiah-denominated bonds this year to help finance the 2004 state budget deficit.
For this year, the deficit has been estimated at Rp 26.3 trillion, or about 1.3 percent of gross domestic product.
According to Anggito, the government would likely divide the remaining bonds issues into two auctions, in October and November.
"It's a possibility as we want everything done by December. But, we'll look into it more closely, it will depend on the market as well. So, nothing has been decided yet," Anggito said.
The next bond issue is scheduled for Oct. 26, he said, but did not disclose the size of the issue.
Tuesday issue carried a coupon of 11 percent and will mature on Oct. 15, 2014, while the interest would be payable twice a year on April 15 and Oct. 15, respectively, a statement said.
Moody's Investors Service rates Indonesia's local currency debt B2, while Standard & Poor's assigns a ranking of B+, data from Bloomberg showed.