Ministry of Finance completes bonds issue for this year

Ministry of Finance completes bonds issue for this year

The Jakarta Post, Jakarta

The government issued on Tuesday some Rp 3.2 trillion
(US$378.70 million)-worth of bonds, which is the last bond issue
for this year aimed to help ease the burden on the current state
budget.

The Ministry of Finance said that the bond issue was
oversubscribed 2.01 times.

The issue brings the total amount of bonds issued during the
year to Rp 11.7 trillion, the same value the state budget has
targeted.

The bonds, which will mature in 2010 and carry a coupon rate
of 12 percent, received total offers of Rp 6.43 trillion, head of
portfolio management at the Ministry of Finance Rahmat Waluyanto
said.

"The seven-year bonds were auctioned for a weighted average
yield of 13.05 percent," Rahmat said, meaning that it was higher
than the 12.92 percent average yield of Rp 2.5 trillion in bonds
issued in November.

Rahmat added that the higher yield was a reflection of market
expectation and financial capability on the part of the
government.

"Overall, we find that the yield, while it represents the
market expectation, is tolerable."

Bond issue, which means issuing new bonds to refinance part of
those due to mature, is a scheme the government is using to
reduce the burden on the state budget, resulting from its huge
domestic debts -- all in the form of bonds.

Some Rp 450 trillion-worth of bonds were issued by the
government to bail out banks from the financial crisis in the
late 1990s. It is the payment of those bonds -- with a large
chunk of them starting to mature -- that the state budget has to
deal with.

Also, not only will it help ease the payment burden on its
huge debts, it will also be crucial to maintain investor
confidence and promote the local bond market.

Rahmat could not elaborate on the specific composition of the
investors buying the bonds, saying that his office was still
making the calculation.

"However, roughly, I can say that the investors this time have
been represented by all market players, such as insurance firms,
pension funds, banks, securities and investment firms, and so
on."

In the 2004 state budget the government has targeted to issue
more bonds totaling Rp 32.5 trillion, in both domestic and global
bonds.