Govt may postpone global bond sales

Urip Hudiono The Jakarta Post/Jakarta

The currently volatile global market -- with crashing bluechip stocks and soaring oil prices scaring investors away -- may force the government to reconsider its plan to issue US$1 billion in dollar-denominated overseas bonds this month.

"If the market proves to be unfavorable, then there is a possibility we will have to postpone the bond offering," Minister of Finance Yusuf Anwar said on Friday.

Yusuf said the government was still closely monitoring the market for its bond issue plan as investors were still in a state of shock following the recent collapse in the stock price of U.S. automotive giant General Motors, and the surge in global oil prices, which hit another record high of $57 per barrel on Thursday.

"These factors have made global investors careful about taking risks in deciding where to put their money," he said.

Also, the U.S. central bank's plan to again raise its interest rate would also be unfavorable for the bond issue as it would increase the government's burden in servicing the bonds in terms of their yields -- the rate of return that investors expect when buying the bonds.

"We expect to be able to keep the cost of borrowing on the bonds to below 7 percent," he said.

The government plans to issue Rp 43 trillion ($4.6 billion) in bonds -- including the $1 billion in global bonds -- to help plug this year's state budget deficit.

With Indonesia's overall credit rating still below investment grade, the bonds are considered junk bonds by International rating agencies.

Global rating agency Standard and Poor's assigned a B+ foreign-currency rating -- four levels below investment grade -- to the bonds.

The government, however, managed to sell $1 billion of 10-year bonds in March last year at a yield of 6.75 percent. The bonds were more than eight times oversubscribed.

The government is currently holding roadshows in Singapore and Hong Kong to promote the global bonds to investors, and keep track of market developments.