Govt may postpone global bond sales

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.