Govt sells Rp4.65t of domestic bonds

The Jakarta Post, Jakarta

The government sold Rp 4.65 trillion (some US$490 million) worth of domestic bonds in the form of two-year and 11-year rupiah securities on Tuesday, with both issues oversubscribed.

The two-year bonds, the Ministry of Finance said in a statement, had received up to Rp 4.47 trillion worth of bids from investors, before a total of Rp 2.1 trillion of them were finally auctioned at an average yield of 9.71 percent.

The sale of the securities -- which will mature on April 15, 2007 -- will add to the Rp 2.1 trillion worth of bonds that the government previously offered on April 26 at a slightly higher 9.77 percent average yield.

Meanwhile, the 11-year securities drew some Rp 3.21 trillion worth of bids, with the government deciding to sell Rp 2.55 trillion worth of the May 15, 2016, maturing bonds at an average yield of 11.29 percent.

The government originally planned to sell only some Rp 2.5 trillion of both securities during Tuesday's auction, which was the fourth local currency bonds sale this year, bringing it to a total of Rp 15.65 trillion in bonds issued for this year in addition to $1 billion worth of sovereign bonds issued in April. Some Rp 43 trillion worth of bonds are expected to be sold this year.

Amid improving investor confidence in Indonesia, the government has been active recently in issuing both rupiah- and dollar-denominated bonds, whose proceeds will in part be used to plug the state budget deficit, which is expected to reach some Rp 19.5 trillion -- or about 0.8 percent of the country's gross domestic product (GDP) -- this year.

Global rating agency Standard and Poor's puts Indonesia's long-term local currency debt rating at BB, five levels below the investments grade of B2, while Moody's rates the rupiah debt B2, two levels below investment grade.

Both credit agencies, however, have given the junk bond ratings a positive outlook.