Second bond issue continues to draw strong demand
Second bond issue continues to draw strong demand
The Jakarta Post, Jakarta
The government struck gold again in its second bond issue for the
year when it managed to sell on Tuesday Rp 3 trillion (some
US$326 million) worth of local-currency bonds -- nearly twice the
amount initially planned -- amid robust investor demand.
The Ministry of Finance announced that the 12-year bond issue
-- the longest in term that the government has ever issued -- was
2.08 times oversubscribed and carried a weighted average yield of
10.42 percent.
"The government received Rp 6.24 trillion in total bids,
mostly from banks and pension fund managers," the ministry said.
In its first bond issue for the year last month, the
government received Rp 12.4 trillion in total bids for 10-year
bonds priced to yield at 10.12 percent. It sold Rp 5 trillion
worth of the bonds, more than twice the planned amount.
Strong investor demand was also reflected in Tuesday's open
auction, as bidders eagerly requested yields for the bonds
ranging from 10.20 percent to 12.00 percent. The highest yield
granted, however, was 10.50 percent, while the lowest was 10.20
percent.
Interest on the fixed-rate bonds is payable every January and
July. They mature on July 15, 2017 and have a coupon rate of 10
percent.
The government plans to issue a total of Rp 43 trillion worth
of domestic bonds this year, including sovereign dollar-
denominated bonds.
The proceeds of the sales will in part go to help redeem
maturing debts and help finance the state budget deficit, which
for 2005 is estimated to reach about 1 percent of gross domestic
product (GDP).
Last year, the government sold Rp 32.5 trillion worth of bonds
including $1 billion in global bonds last March -- all
enthusiastically grabbed up by investors.
Many analysts predict that Indonesia will do well with its
government bond issues this year, due to the country's improving
economy as reflected in the recent upgrading of its debt ratings.
Global rating agency Moody's recently upgraded its outlook for
Indonesia's current B2 long-term local currency rating -- which
is still five levels below the investment grade -- to "positive"
from "stable".
Fitch Ratings also raised Indonesia's long-term foreign and
local currency ratings to BB- from B+, and affirmed its short-
term rating at B, both with positive outlooks. Standard and
Poor's, meanwhile, upgraded Indonesia's long-term foreign
currency to B+ from a B and the local currency rating to BB from
B+, all with positive outlooks. The ratings remain two-levels
below their respective investment grade.