T

he government concluded its bond sales for 2010 on Tuesday as it met the target for funds needed to plug the lower-than-expected budget deficit, a ministry official says.

Rahmat Waluyanto, director general of the Finance Ministry’s debt management office, said the government sold Rp 2 trillion (US$222 million) in bonds in the final auction of this year, which raised the value of this year’s bond issuance to Rp 162 trillion.

He said four series of bonds that were auctioned at 5.56 and 6.97 percent yields on Tuesday received total bids of Rp 4.87 trillion, but “we decided to sell a series worth Rp 2 trillion with a 8.37 percent yield and 16-year tenure.”

“The requirements to finance this year’s budget deficit were not that high, so we managed to lower the debt issuance by nearly Rp 16 trillion this year,” Rahmat told The Jakarta Post.

The government was previously expected to raise Rp 178 trillion from treasury bonds this year to plug the 2010 budget deficit, which was projected to reach 2.1 percent of the gross domestic product (GDP).

However, Finance Minister Agus Martowardojo said recently that this year’s budget deficit might be lower, between 1.2 and 1.3 percent of the nation’s GDP.

Rahmat added that the government decided to reduce the issuance of treasury bonds in August in a bid to curb inflows of foreign short-term funds. “Capital inflows were heavier this year,” he said.

Indonesian bonds have been attractive to foreign investors this year, with a net purchase of Rp 87.8 trillion as of Dec. 9, the debt office’s data showed. Foreign ownership of government bonds stood at
Rp 195.76 trillion, or 30.47 percent of total tradable bonds.

Indonesia has been considered one of the most attractive investment destinations this year, not only due to its promising economic growth but also its relatively high interest rate.

This year’s Rp 162 trillion bond issuance comprises US dollar denominated bonds worth $2 billion, Samurai bonds worth ¥60 billion and Islamic bonds (sukuk) worth Rp 30 trillion.

Rahmat said the government might issue treasury bonds worth more than Rp 200 trillion next year to cope with a higher budget deficit, which was estimated to reach 1.8 percent of the GDP.

Next year’s government bonds would include a combination of domestic, international, retail and non-retail notes, including so-called samurai bonds, euro bonds and Islamic bonds, he said. “But we want to maximize the domestic issuance.”

Indonesia, which is poised for a rating upgrade to investment grade in 2011, can attract even more foreign funds next year.

The yield for 11 percent notes due November 2020 rose 13 basis points to 7.51 percent, according to
closing prices from the Inter Dealer Market Association. The price dropped 1.0471, or Rp 10,471 per
Rp 1 million face amount, to 124.1262. A basis point is 0.01 percentage point. (est)