Govt upbeat about bond issue amid improved rating

The Jakarta Post, Jakarta

With investors' early response promising, the government is confident that it will do well in its plans to offer at least US$1 billion of its securities on global bond markets later this month.

"The spread of our bond yield is decreasing, while our credit rating has improved," State Minister of State Enterprises Sugiharto said on Tuesday, after a meeting with President Susilo Bambang Yudhoyono to report the results of his roadshow to Hong Kong for the sales.

Only recently, the government held roadshows for potential investors in Singapore and Hong Kong, as well as other roadshows to other world financial centers in the U.S. and Europe.

The finance ministry's director general of state treasury, Mulia Nasution, said that investors' response during the recent roadshows had been promising, amid Indonesia's improving credit rating.

Sugiharto explained that Indonesia's global bond yield used to be 277 basis points -- or 2.77 percent -- above the benchmark yields of U.S. treasury bills.

"I think it would be comfortable enough if we can achieve a yield for our bonds of between 180-190 basis points above the U.S. treasury bills issued in February," Sugiharto said.

Market analysts have said that Indonesia's global bonds would be regarded as less attractive if its yield difference with U.S treasury bills -- or spread -- was above 2 percent.

Sugiharto admitted, however, that many investors were still waiting for the latest news on U.S. auto giant General Motors Corp.'s bonds, which recently fell to junk status and sent the global bond market into a volatile mood.

Several bond issues have been disturbed due to the situation, making deals hard to price and more expensive for borrowers.

"So what is important now is the timing, sizing and pricing of the bonds," Sugiharto said.

After considering postponing the bond offering due to the situation, Minister of Finance Yusuf Anwar confirmed on Monday that it would go ahead as scheduled.

The government plans to offer bonds amounting to Rp 43 trillion (about $4.6 billion) throughout the year, including the dollar-dominated bonds -- the proceeds of which would be used to help plug the state budget deficit.

Last year, the government managed to sell $1.5 billion dollar- denominated bonds, at a yield of 6.75 percent.