Govt to delay bonds issuance: Boediono

The Jakarta Post, Jakarta

Minister of Finance Boediono said on Friday that the government will delay the planned issuance of treasury bonds (T-bonds) from October to early November.

"It (the issuance) will be made in November," he said, adding that the ministry would hold a meeting later in the day to discuss the matter.

The government initially planned to issue around Rp 5.7 trillion worth of T-bonds in two stages starting October as part of efforts to raise cash to finance this year's state budget deficit.

In April, the government issued around Rp 2.7 trillion in T- bonds. The issue was a success, with huge interest shown by investors. But a second issue in September was disappointing amid insufficient demand. The government was forced to cut down the size of the issuance to Rp 3.99 trillion from the initially planned Rp 5 trillion.

Analysts attributed the lackluster demand to the long-term maturity profile of the bonds. The bonds, carrying a weighted average yield of 11.6 percent, are due to mature in December 2012.

Against the backdrop of the last issue, the government needs to change the maturity profile of its bonds in order to attract investors, analysts have said.

Bank Indonesia agreed, saying that investors might view long- term bonds as less attractive because they carry a higher risk than short-term bonds.

A long-term maturity profile causes less burden on the state budget as the government has more time to prepare payments for the bonds.

The state budget has been heavily burdened by the government's obligation to pay-out on maturing bonds -- issued in the late 1990s to bail out troubled banks -- ammounting to about Rp 450 trillion.

Boediono said that although the next bond issue will be delayed, the size will not be altered and the issue will still be made in two stages before the end of this year.

The government will also rely on bonds to help finance next year's state budget, particularly as -- with the termination of the existing International Monetary Fund economic bailout program -- the country is no longer eligible to use debt rescheduling facilities from the Paris Club of creditor nations.

Next year, the government intends to issue around Rp 28 trillion worth of T-bonds in the domestic market and another Rp 5.3 trillion worth of international bonds.