Govt's dollar bonds draw record bids

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Thu, 06/19/2008 9:59 AM  |  Business

The government raked in US$2.2 billion Tuesday by selling dollar-denominated bonds in New York, higher than the $1.5 billion target, drawing record bids from investors, an official says.

"It was the largest book order of Indonesian bonds," Finance Ministry's director general of debt management Rahmat Waluyanto said in a text message Tuesday (Wednesday Jakarta time).

The bond sale attracted $6 billion of bids.

The government, Rahmat said, sold $300 millions of Indo-14 bonds maturing in March 2014 with a 6.69 percent yield, $900 million in Indo-18 notes maturing in January 2018 with 7.28 percent yield and $1 billion in Indo-38 notes due in January 2038 with an 8.15 percent yield.

It was "a very positive response from investors, boosted by Indonesia's improved credit ratings and strengthening economic fundamentals ... amid the difficult global conditions", Rahmat said.

Credit Suisse Group, Deutsche Bank AG and Lehman Brothers Holdings Inc. managed the sale.

The $2.2 billion will be used to help plug the budget deficit of Rp 82.3 trillion ($8.86 billion), or 1.8 percent of the country's GDP.

In response to the dollar bonds sale, economist Dradjad H. Wibowo said the yields were too high, and "they might cause the government to spend more money on plugging the deficit".

"The government needs to maximize bond issuances to plug the deficit, but it must also follow market conditions," said Dradjad, who is also a lawmaker on the House of Representatives' Commission XI overseeing financial affairs.

The government has planned to issue Rp 117.8 trillion in bonds -- both rupiah and dollar-denominated this year to reduce the budget deficit.

In August, the government plans to sell its first Islamic bond (sukuk) to the domestic market. It plans also to sell sukuk to the international market in October, aiming to tap funds from Middle Eastern investors who are reaping windfall profits due to the soaring oil prices.

The government last sold dollar-denominated bonds in January, raising $2 billion. Indo-18 notes were sold with a 6.95 percent yield and Indo-38 bonds at 7.74 percent.

Hartadi A. Sarwono, the central bank deputy governor, said the dollar-denominated bond sale would improve market sentiment and strengthen the rupiah.

"The sale will go to our foreign reserves and the money can be used to buy the rupiah," Hartadi said.

As of May, the central bank's foreign reserves stood at $57.46 million.

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