T

he government is unlikely to offer any more US dollar-denominated bonds this year, despite the successful US$2.5 billion sale earlier this week, according to a senior debt official.

The Finance Ministry’s debt management office (DMO) sold $2 billion worth of 10-year notes and $500 million of 30-year notes on Tuesday. The bonds received $7.9 billion worth of bids — more than triple their value — with yields exceeding by 180 basis points similar US Treasuries, indicating foreign investors’ confidence in Indonesia’s economy.

Bhimantara Widyajala, a bond director at the DMO, said on Thursday that there was no intention to add dollar-bond issuance to tap the growing interest in Indonesia’s government bonds. The government has issued $4.25 billion in dollar bonds so far this year, with the first being $1.75 billion worth of 30-year notes.

“In our debt management strategy, the domestic [market] remains the top priority for funding sources,” Bhimantara told The Jakarta Post. “There has not yet been a plan to add a US-dollar bond issuance.”

The government has planned to offer Rp 159.6 trillion in bonds this year to plug the state budget deficit and fund development projects, with almost 50 percent already issued.

“The recent bond sale signals that Indonesia is deservedly an investment destination. It shows that Indonesia can sell bonds with yields lower than Italy and Russia, which have higher credit ratings,” Bank CIMB Niaga economist Andry Asmoro said.

The latest 10-year dollar-bond yield of 3.85 percent, Indonesia’s lowest ever, was below its emerging peers and debt-stricken European nations. Yields move in the opposite direction of prices, with lower yields meaning more expensive pricing.

Bond issuances have become less costly for the Indonesian government as the country’s resilience during the global economic slowdown has lured foreign investors to the largest economy in Southeast Asia, which last year grew at its fastest pace in 15 years, at 6.5 percent.

Fitch Ratings and Moody’s Investors Service’s upgrade on Indonesia’s sovereign credit rating to investment grade has also made investment risks lower, seeing investors paying a premium to buy the country’s notes.

The achievements could enable the government to add more dollar-bond issuances this year, since the appetite is strong and yields for dollar-bonds are lower than those for the local rupiah, according to Andry.

“But the government’s bond portfolio must remain proportional,” he said. “Too many global bonds could make the market more prone to external shocks.”

DMO director general Rahmat Waluyanto said there were two foreign-currency bond issuances remaining this year, which
are the yen-denominated Samurai bonds and Islamic dollar-bonds (sukuk).

“We are still calculating if we need to issue [Samurai bonds]. If we do, it will be done in the beginning of the second semester,” Rahmat told the Post. “As for global sukuk, the issuance will not be too large.”

Indonesia last year cancelled its Samurai bond offering due to the tsunami in Japan, after raising ¥60 billion in 2010 and ¥35 billion in 2009. The country’s sukuk issuances have also showed strong demand after collecting $1 billion last year and $650 million in 2009.