T

he government sold Rp 9.9 trillion (US$876 million) worth of debt papers on Wednesday in an oversubscribed auction as the country'€™s latest trade and inflation data attracted investors.

The Finance Ministry'€™s debt management office (DMO) aimed for Rp 8 trillion previously, but incoming bids of Rp 26.2 trillion, which means the offering was more than four times oversubscribed, have prompted the government to upsize the bond issuance.

'€œInvestors are flocking in thanks to the latest positive data on the trade balance and inflation,'€ head of the Finance Ministry'€™s DMO, Robert Pakpahan, said after the auction.

Inflation fell to the lowest level in nine months at 7.3 percent in March, while the trade balance posted a $785 million surplus in February after experiencing a deficit in the previous month, the Central Statistics Agency (BPS) announced on Tuesday.

'€œThe domestic data was a dominant factor [behind the strong bids] in today'€™s auction, but there'€™s also an influence from the current '€˜calm period'€™ in the external environment, as sentiment from the Fed [US Federal Reserve] tapering has begun to dry down,'€ Robert explained.

All yields fell, with weighted average yield for 10-year government bonds in the last auction touching 7.79 percent, versus 8.09 percent in the auction on Mar. 4, DMO data shows. Lower yields mean higher prices.

The government sought to capitalize on the high incoming bids and took advantage of the low-yield environment that could ease its finances when it has to pay back the debt papers when they mature, according to Robert, who has also said that the government will not upsize its overall bond issuance until mid-year.

'€œIn the past two weeks, yields are seen moving lower across the curve, particularly on the benchmark tenors, supported by the positive economic data and the stabilizing rupiah,'€ Dian Ayu Yustina, an economist with privately owned Bank Danamon, wrote in a research note released on Wednesday.

Indonesia'€™s government bonds were Asia'€™s best-performing notes this year. Rupiah bonds offered returns of 4.64 percent year-to-date throughout last week, while on average Asian local currency bonds only posted 0.75 percent gains, according to the Mandiri Sekuritas Government Bond Index (MSGBI).

However, an additional rally for rupiah bonds in the future may be unjustifiable, as the yields '€œmight have limited room to fall further'€, according to Mandiri Sekuritas fixed-income analyst Handy Yunianto.

'€œYields look rich now,'€ he wrote in a research note.

'€œGiven the recent rally, we recommend investors not to chase bonds for now and wait to buy on weakness or shorten duration and overweight in corporate bonds at the current level,'€ Handy added.

During Wednesday'€™s debt paper offering, the government offered five types of bonds (three-month and one-year treasury bills, as well as five-year, 10-year and 20-year notes), which were all sold out.

Investors are opting for short-term notes, as bid-to-cover ratio for three-month and one-year T-bills topped 4.2 and 5.1, respectively '€” the highest among all the five bonds.

As the rupiah strengthens, Indonesia'€™s US dollar bonds have also given the highest return for investors at 12.3 percent so far this year, the most in Asia, as compared to 3.8 percent in Thailand and 3.0 percent in India, according to HSBC Bond Index.