Danantara plans new low-yield bond as investors shun Indonesia

[JAKARTA] Indonesia’s sovereign wealth fund Danantara is planning to sell local-currency bonds that will pay interest below market rates, at a time when global investors are rapidly losing confidence in the nation’s markets.  

The proposed debt offering is reminiscent of fundraising last year. It is still at a preliminary stage.

The bond will carry a coupon of 3 per cent and be open to local and foreign investors, going by a document seen by Bloomberg News. 

A representative for Danantara did not respond to queries.

It comes against a backdrop of waning global investor confidence in South-east Asia’s largest economy, with Indonesian stocks tumbling and the rupiah weakening to record lows this week.

Investors have been unsettled by President Prabowo Subianto’s increasingly interventionist policies, including a plan announced in May to centralise exports of key commodities under a unit of Danantara. 

The planned local-currency debt by the fund, established by Prabowo in 2025, comes hot on the heels of a mandate to banks on Wednesday (Jun 3) for a potential global US dollar-bond sale. 

The rupiah debt has been dubbed the “Merah Putih Bond”, with the Indonesian words meaning red and white, a term that locally refers to the country’s flag.

The size or tenor of the bond was not specified.  

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The new issuance plan has some similarities to so-called Patriot Bonds that Danantara rolled out last year in private placements due to its lower coupon, sources said, who asked not to be identified discussing private matters. 

The Patriot Bonds sparked unease among wealthy tycoons and business owners, many of whom saw little choice but to participate in the low-yield debt offering that paid less than half of market rates.

As of Apr 30, Danantara has issued 68.38 trillion rupiah (S$4.87 billion) of Patriot Bonds, via its investment arm Danantara Investment Management, its latest financial statements revealed.

The Merah Putih Bond is not specifically targeting the rich, sources said 

Fitch Ratings and Moody’s Ratings earlier this year lowered their credit outlooks on the nation to negative, citing policy uncertainty and weakening governance. BLOOMBERG