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Indonesia raises US$4b in dollar bonds
[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 per cent 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.
Finance Minister Bambang Brodjonegoro said Indonesia may issue more debt in the global market this year. Scenaider Siahaan, a director at Indonesia's debt management office, said the country plans to issue global sukuk and samurai bonds in the first quarter 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.
Mr Joko, 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.
Moody's Investors Service assigned on Thursday a 'Baa3'rating on Indonesia's global bond offering, indicating a stable outlook. It expects Indonesia to maintain a low level of government debt and relatively narrow fiscal deficit against a"slowing - but still healthy - economic growth". "Recent policy measures support this expectation," Moody's said, adding that the moves on subsidies "improve fiscal flexibility".