Govt may issue bonds later this month

The Jakarta Post, Jakarta

The government plans to issue more bonds later this month or early next month to refinance maturing bonds.

"We'll announce the exact timing -- whether to issue the bonds this month or next. We'll keep a watchful eye on the market," Boediono said on Friday.

Boediono did not specify the value of the bonds, but the government still has around Rp 5 trillion-worth of bonds to be issued this year.

In total, the government has planned to issue Rp 11.7 trillion-worth of bonds this year to help refinance some of the Rp 55 trillion-worth of government recap bonds maturing this year.

Thus far, the government has issued Rp 6.7 trillion of the Rp 11.7 trillion in bonds.

Boediono said the remaining Rp 5.7 trillion-worth of bonds would be issued in two stages, with the first slated for later this month or early next year.

The government has said the scheme is highly important to help ease the payment burden of its huge domestic debts, as well as to maintain investor confidence and promote the local bond market.

The state budget has been heavily burdened by the payment of recap bonds totaling Rp 430 trillion that were issued in the late 1990s to bail out troubled banks.

The next bond issue will be overshadowed by the disappointing results of the last bond issue in September, in which the government had to scale down the value of the issue, mostly due to insufficient demand.

The government was able to sell only Rp 3.99 trillion-worth of bonds as against the target of Rp 5 trillion. This, analysts suspected, was because of the long-dated maturity profile of the bonds.

The bonds, carrying a weighted average yield of 11.6 percent, are due to mature in December 2012.

The result of the September issue was in stark contrast to the first issue of the year in April. That time, the government's Rp 2.7 trillion-worth of bonds were 2.8 times oversubscribed.

Analysts have said that investors might view the long-term bonds as less attractive because they carry higher risks than those of the short-term ones.

They said the government needs to strike a balance between investors' preference and the need to ease the burden on the state budget.

Nevertheless, Boediono said the government was still upbeat that the next bond issue would be successful, given "the market's high level of liquidity."

He did not elaborate.