RI surpasses bond issuance target
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The Finance Ministry successfully raked in Rp 9 trillion (US$926 million) from government bonds, higher than its initial target of Rp 7 trillion, in an auction on Tuesday, in its first debt papers offering of 2013.
The government decided to raise Rp 2 trillion higher than its initial target as the yield prices offered by investors remained in the acceptable price range, said Robert Pakpahan, the head of the Finance Ministry’s debt management office.
Robert revealed that the weighted average yields for the 3-month and 1-year government debt papers were 3.99 percent and 4.33 percent. Meanwhile, the yield for the 5-year, 10-year and 20-year notes were 4.66 percent, 5.2 percent and 6.1 percent, respectively.
Incoming bids in the auction topped Rp 17.8 trillion.
“It means that the auction had good demand. The perception of Indonesia’s economy is still generally positive as the government absorbed well above its initial target of Rp 7 trillion,” said Bank Danamon bonds analyst Dian Ayu Yustina. Indonesia has been able to borrow funds at more competitive rates, thanks to its investment grade status granted by several prominent rating agencies.
According to Finance Ministry data released this week, yield of rupiah-denominated government bonds stood at 5.16 percent as of Jan. 9, lower than the 5.19 percent as of Dec. 27, indicating improved confidence among investors.
The ministry also revealed that the average interest rate for the 3-month government debt papers (SPN) would be between 3.2 to 5 percent throughout 2013, lower than its previous estimation of 5 percent, citing a brighter outlook in the domestic bonds market.
The government planned to issue at least Rp 57.5 trillion in the first quarter this year, slightly less than the Rp 60.3 trillion in the same quarter last year.
This year, the government plans to raise Rp 180.4 trillion through government securities in its bid to plug the budget deficit, set according to the 2013 State Budget Law at 1.65 percent of gross domestic product (GDP).
Finance Minister Agus Martowardojo recently revealed deviations in several macroeconomic assumptions in the 2013 state budget, including economic growth and the rupiah.
Such deviations might lead the realization of budget deficit to exceed 1.65 percent of GDP, eventually forcing the government to issue more bonds to finance the deficit, said Mandiri Sekuritas bonds analyst Handy Yunianto. “The issuance of government bonds may spark negative sentiment in the local bonds market,” he said on Tuesday.
Analysts feared that the recent trend of the weakening rupiah would spark foreign outflows in the local bonds market as investors faced declining returns from currency depreciation.
The rupiah has been the worst performing currency in the region in 2013, having depreciated by 5.9 percent against the US dollar throughout last year. (sat)