Last bond issue draws strong response

Last bond issue draws strong response

The Jakarta Post, Jakarta

The government auctioned its last bond issue of the year worth Rp
1.8 trillion (US$199 million) on Tuesday, with the proceeds to be
used for financing the state budget deficit, the Ministry of
Finance said.

Treasury director general Mulia Nasution said the auction drew
bids amounting to Rp 7.3 trillion, making the issue four times
oversubscribed.

"There were enormous offers, but we could not issue bonds more
than the House has agreed on," Mulia said. Tuesday's issue had
completed the full-year bond issue target of Rp 32.3 trillion,
she said. This included the $1 billion sovereign bond that was
sold in March.

The buyers of the latest bond -- which carries a 10-percent
coupon rate and was priced to yield 10.27 percent -- came mostly
from the banking sector and pension-fund firms, Mulia said.

The government has been issuing bonds during the past year to
raise fresh funds to plug the budget deficit, whose financing
ability has been heavily burdened by huge payments of debts --
mostly domestic ones.

For this year, the budget deficit is expected to expand to 1.5
percent of gross domestic product, compared to original target of
1.3 percent of GDP, or about Rp 26.3 trillion, due to soaring
fuel subsidy costs.

Moody's Investors Service rates Indonesia's local-currency
debt at B2, while Standard & Poor's assigns a ranking of B+. Both
are junk, high-yield, or high-risk designations, according to
Bloomberg.