Govt launches third bond issue, this time a successful one
Govt launches third bond issue, this time a successful one
The Jakarta Post, Jakarta
The government has issued Rp 2.5 trillion worth of 7-year
bonds, the third issue this year, drawing the interest of more
than twice the amount offered, the Ministry of Finance said on
Tuesday.
Fuad Rachmany, head of the debt management unit at the
ministry, said that investors had bid for about Rp 5.4 trillion
through an auction, meaning that the issue was 2.17 times
oversubscribed.
The successful issue, he added, might have something to do
with the bonds carrying a shorter maturity profile and higher
yield than those of the previous issues.
The bonds issued on Tuesday, which will fully mature in 2010,
carried a 12 percent fixed-rate coupon payable twice a year and
was priced at a weighted average yield of 12.92 percent, a
discount from the previous bond issues.
In the first two bond issues this year, conducted in April and
September, the bonds were priced at the weighted average yield of
12.1 percent and 11.6 percent, respectively.
The government had to come up with such a move following its
failure in its second bond issue.
Low demand at that time forced the government to scale back to
around Rp 4 trillion, from the initial target of Rp 5 trillion.
The eight-year tenor bonds with an average yield of 12.99 percent
were believed to be less attractive to investors.
Tuesday's bond issue formed part of the government's plans to
issue a total of Rp 11.7 trillion in bonds this year, to help
refinance part of the huge number of bonds maturing this year,
thus helping reduce the 2003 state budget deficit.
Some Rp 55 trillion worth of bonds are expected to mature this
year.
After the third issue, the government still has to issue
another Rp 3.2 trillion of bonds before Dec. 31.
Previously, the size of the bond issue this year was targeted
at Rp 7.7 trillion, but the government decided to increase the
size of the bond issue to Rp 11.7 trillion.
Asked whether the same approach would be applied in the next
bond issue, Fuad said the government would leave it all to the
market.
"From the government's point of view, we certainly want long-
term bonds, but the market seems to be more fond of medium-term
ones. So, we'll have to take a closer look at those factors as
well," he said.
Bond issues are a scheme the government has used recently in a
bid to reduce the burden resulting from its huge domestic debts -
all in the form of bonds, both principal and interest.
The state budget has been heavily burdened by the payment of
maturing bonds totaling about Rp 450 trillion that were issued in
the late 1990s to bail out troubled banks.
To ease that burden on the cash-strapped state budget, the
government has launched more bonds to refinance the maturing
ones.