Wed, 17 Dec 2003

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.