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.