Indonesia raises US$4b in dollar bonds, wins strong demand

[JAKARTA] Indonesia has raised US$4 billion in a US dollar bond issue, taking advantage of the current low-yield environment and improving sentiment about the country and policies its new president is pursuing.

The yield is at 4.200 per cent for US$2 billion of 10-year notes and 5.200 percent for US$2 billion 30-year notes.

This compares with a yield of 5.950 per cent for 10-year notes and 6.850 per cent for 30-year notes for similar sized tranches Indonesia issued one year ago.

With the improved terms on the new bonds, "Indonesia has to fork out a lower percentage than in a tough market," said Wellian Wiranto, an economist at Singapore's OCBC bank.

Demand for the new bonds was strong. Bankers said this led Indonesia to increase its total size to US$4 billion rather than US$3 billion.

The Finance Ministry said on Friday the bonds drew bids for US$19.3 billion, the largest-ever combined order book for Indonesian sovereign bonds.

Scenaider Siahaan, a director at Indonesia's debt management office, said the country is planning to issue global sukuk and samurai bonds in the first quarter of 2015 as the yield is currently favourable.

Investor sentiment on Southeast Asia's largest economy has improved after former Jakarta governor Joko Widodo was elected president in July.

Jokowi, who took office in October, aims to introduce bold reforms. Helped by tumbling global oil prices, he slashed fuel subsidies, which will save the government billions of dollars that can instead be spent on infrastructure and sectors such as education. "The government's focus is really to pursue the agenda of better infrastructure and maritime sectors," said Wiranto of OCBC. "I think from the eyes of the marketplace, that is good spending rather than wasted spending." The Indonesian government is aiming to cut its budget deficit to 1 per cent of gross domestic product by 2019, partly by reforming the tax system, Finance Minister Bambang Brodjonegoro said in December.

Brodjonegoro had said he would revise the budget deficit target for this year to 2 per cent or less, below the 2.2 per cent proposed by the former administration.

REUTERS