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espite concerns over selling-off pressure and tighter liquidity ahead, Indonesia still managed to meet its dollar bonds issuance target, as fixed income investors moved to take advantage of the high yields offered by the government.

The Finance Ministry'€™s debt management office successfully raised US$1 billion from selling 10-year dollar bonds to foreign investors on Thursday, with incoming bids topping $1.9 billion, meaning the offering was almost two times oversubscribed.

Investors were attracted by the 10-year dollar securities'€™ high yields, which reached 5.4 percent '€” the highest in three years. The yield, which is 282 basis points below the premium US treasuries, was also significantly higher than the government'€™s last global bonds auction on April, which offered the 10-year dollar notes at 3.5 percent.

The high yields offered by the government was caused by the correction in bond yields throughout the global market, notably the steep correction in US treasuries, said the Finance Ministry'€™s debt management office head Robert Pakpahan. Nevertheless, the government was '€œquite satisfied'€ with the auction results, he added.

'€œAmid a high level of market uncertainty, we view the recent Indonesian bond deal as an encouraging market event '€” the deal was able to take place despite the recent broad pull-back from emerging markets,'€ said Thierry Taglione, managing director of fixed income products with Manulife Asset Management in Hong Kong.

The recent widening spread between government securities issued by Asian and developed countries had opened up new attractive entry points for bonds investors to enter the Indonesian bond market, he explained via an email interview.

Despite the successful sale, however, the recent spike in yields during the latest auction was seen as a concern. The government was forced to tolerate higher yields on Thursday'€™s auction after its last dollar-denominated bonds issued in April, which had yields of 3.5 percent, fared poorly in the secondary market, analysts have said.

Indonesian dollar bonds have declined 13 percent this year, the most among the 11 Asian developing economies tracked by HSBC Holdings Plc indices. Yields for 10-year dollar bonds sold in April fell seven basis points to 5.07 percent on Thursday, prices compiled by Bloomberg show.

'€œThe reason why our dollar bonds haven'€™t been performing too well is because the increasing risks to invest in Indonesia, mainly because the depreciation pressure of the rupiah, coupled with the trade deficit that the country has recorded over the last few months,'€ said I Made Adi Saputra, a Jakarta-based fixed income analyst with Nusantara Capital.

The government has targeted dollar-denominated securities to account for 18 to 20 percent of the gross target issuance of Rp 332 trillion (US$33.2 billion) this year.

The maximum ceiling previously stood at around 15 percent, but was revised upward after seeing the strong demand among investors in dollar bonds.

Soaring yields in the government'€™s rupiah-denominated securities also means that additional dollar bond issuances might be needed. The yield for the 10-year, rupiah-denominated government bonds traded in the secondary market touched 8.01 percent this week, the highest level since March 2011, prices from the Inter Dealer Market Association show.

However, there are risks for Indonesia if it issues too many global bonds, Made warned. '€œAt times, when the rupiah is in a depreciation trend like now, debt payment burdens may become larger,'€ he said in a phone interview.