T

he Indonesian government raised US$4 billion in a sale of dollar-denominated notes on Friday that was oversubscribed fivefold, as it expedited their issuance very early this year in anticipation of tighter global liquidity caused by a possible US interest rate hike.

The latest sale of Indonesia'€™s global bonds attracted $19.3 billion worth of bids from investors, while a similar issuance last year drew $17.5 billion.

'€œWe are seizing the momentum during the early-year period when the global financial market still has ample liquidity,'€ Robert Pakpahan, the head of the Finance Ministry'€™s debt management office, said via a text message.

He added the government decided to frontload the issuance in anticipation of a normalization of monetary policy in the US this year, which might tighten global liquidity and drive up yields in the future.

On Friday, the Indonesian government raised $2 billion each from the sales of 10-year and 30-year notes with yields standing at 4.2 percent and 5.2 percent, respectively.

The yields were '€œvery good'€ for the government, Robert said. In comparison, the yields for Indonesia'€™s dollar bonds of the same maturity periods issued in January last year stood at 5.95 percent and 6.85 percent for the two notes.

Lower yields are preferred by bonds issuers, who in turn would face lower borrowing costs because of the ability to pay cheaper interest rates to investors.

'€œThe result of the latest bond issue is a reflection of investors'€™ confidence in the new government,'€ Finance Minister Bambang Brodjonegoro said on Friday.

The government planned to issue bonds denominated in US dollars, Japanese yen and euro this year '€” in addition to the regular rupiah notes '€” to plug the fiscal deficit, estimated at 1.9 percent of the gross domestic product (GDP) in the revised 2015 State Budget.

Bambang said that the dollar-denominated notes, such as global bonds and global sukuk, would be frontloaded in the first semester this year, given the prospect of US interest rate hikes that could push up the borrowing costs of US dollar notes. Meanwhile, the yen and euro notes might be issued in the second half, he added.

For foreign investors, investing in emerging economies'€™ dollar notes is considered safer than investing in their local currency notes, which present a risk of exchange rate depreciation. Data from Bank Indonesia (BI) shows that the rupiah fell 2 percent throughout 2014.

Emerging market economies have rushed to frontload their bonds issuance to early this year in expectation of possible interest rate hikes in the US, which could drive up global yields and make their borrowing costs more expensive.

Indonesia followed the Philippines, which became the first country in Asia to offer sovereign global bonds on Wednesday, as it sold $2 billion of 25-year notes with a yield of 3.95 percent, with the offering attracting $13.5 billion worth of bids.

'€œMany investors are still looking for high-yield investments particularly in the emerging markets, given the gloomy outlook in Europe and Japan,'€ said Herdi Ranu Wibowo, the head of the debt capital markets division of BCA Sekuritas.

The dollar bonds sold by the governments of Indonesia and the Philippines were realistic investment choices in the current global situation, given the attractive yields that the two countries offered, he explained on Friday.