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Wednesday, January 13, 2010

Government cut down global bond target: SUN auction tapped IDR7.5 trillion

as published in Bisnis Indonesia daily newspaper
Wednesday, 13/01/2010 00:00 WIB

Government cut down global bond target: SUN auction tapped IDR7.5 trillion

JAKARTA: The government cancelled the global bond issuance scheme with 30 years tenure so as to cut down indicative target from the former US$4 billion into US$2 billion.

As to some Bloomberg sources, the bond will have about 6 percent yield or has 2.2 percent gap with the US government bond with the same tenure. In the bond issuance, the government uses the service given by Barclays Capital Plc, Citigroup Inc and Credit Suisse Group AG.

Yield here is higher than the Philippines government bonds last year at the level of 5.67 percent. Standard & Poor's rating of the neighboring country is the same as Indonesia at the level of BB-.

When asked about the bond issuance scheme, Director General for Debt Management Rahmat Waluyanto could hardly give any comment. "Just wait for the announcement as there is no decision at all," he said via SMS yesterday.

Formerly the government plans to issue global bonds with 10 and 30 years tenures with indicative target of US$4 billion. With the cancellation of bond issuance with 30 years tenure, the government will only absorb the 10 years tenured bonds demand worth US$2 billion.

Bond analyst of PT Trimegah Securities Tbk Ariawan said the cancellation of global bond issuance scheme does not spark any negative sentiment to the global bond market players.

"If the US$2 billion bond issuance is successful, it will make positive sentiment as the market players are still interested in the Indonesian instrument. The government is also benefited by the oversupply deposits in dollar early the year."

Meanwhile, the data of HSBC Holdings Plc mentions the quarterly return which ends on January 11, 2010, the return of global bonds will be -1.69 percent or at the ninth level of 12 Asian countries surveyed by the institution.

The top return was given by Sri Lanka with 5.99 percent, then followed respectively by India 4.32 percent, South Korea 2.76 percent, Thailand 2.59 percent and Hong Kong 1.78 percent.

Rahmat formerly said the return was affected by the risk perception of bond. When the Indonesian bond return is low or drops drastically, the risk perception of foreign exchange SUN will drop.

The low investment risk perception drives the incoming foreign investment to the government notes so as to increase the price, capital gain and decrease the yield.

Governement bond ownership per January 8, 2010 mentions the soaring overseas ownership totaling IDR109.53 trillion as from December 2009 or IDR108 trillion with the floating notes worth IDR581.75 trillion.

Yesterday, the government could rake up some IDR7.5 trillion funds from the sales of five government bonds (SUN) series in rupiah denomination. This was higher than the indicative target set formerly of IDR5 trillion. The incoming book building stood at IDR14.87 trillion.

Finance Ministry data shows that the government yesterday absorbed IDR1.45 trillion of FR0027 series with 2015 due date and 8.18 percent yield. The incoming offering for the series was about IDR3.8 trillion.

Besides, the government absorbed FR0028 with 2017 due date worth IDR2.7 trillion with 8.68 percent yield, and the FR0052 with 2030 due date wroth IDR2.25 trillion with 10.54 percent yield. The government also absorbed the treasury notes of SPN20110113 series worth IDR1.1 trillion at the yield of 6.8 percent.

Rahmat said the auction result surpassing the earlier target shows the very potential demand from investors.

Almost all demands are in the benchmark of the government yield at 99 percent.

But the government only absorbs 53 percent as the maximum rise of target is only 50 percent of the indicative target set formerly.

"The overseas investors are still dominating as they believe the long term economy fundamental condition." (Bisnis/iaa/rni)

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