Indonesia sells 1 billion euros of sovereign bonds in debut

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Euro-bondsIndonesia’s debut sale of euro bonds attracted bids for almost seven times the 1 billion euros ($1.4 billion) sold, as the country took advantage of lower borrowing costs in Europe.

The nation issued the seven-year notes at 2.976 per cent, or 195 basis points above the euro mid-swap rate, the finance ministry said in an e-mailed statement today. That compares with the 4.032  secondary-market yield on Indonesia’s similar-maturity sovereign dollar securities, data compiled by Bloomberg show. The sale attracted 6.7 billion euros of bids, the ministry said in the statement.

Indonesia, which holds a presidential election on July 9, needs to sell a record amount of debt this year to fund a fiscal deficit target of 2.4 percent of gross domestic product, which was increased from 1.69 per cent last month. The European Central Bank cut its benchmark interest rate to a record-low 0.15 per cent on June 5 and introduced negative deposit rates. The euro sale was aimed at reducing reliance on dollar bonds as the US cuts stimulus, Indonesian authorities said in January.

“Indonesia successfully opened a new market for itself,” Yudistira Slamet, head of fixed-income research at PT Danareksa Sekuritas, one of the selling agents, said in interview in Jakarta today. “Indonesia locked in a relatively low yield, compared with its existing bonds, while European investors won an attractive rate.”

“It’s smart of Indonesia to tap the euro market now as the ECB’s easing bodes well for demand,” Ezra Nazula, head of fixed income at PT Manulife Aset Manajemen Indonesia in Jakarta, who oversees about 24 trillion rupiah ($2 billion) of assets, said yesterday. “The trend for dollar yields is up, while euro yields should remain low. This is the government’s way of responding to this.”

Indonesia sold 24 per cent of the euro bonds to investors in the UK, 19 per cent to those in Germany and Austria, 4 per cent to Switzerland, 18 per cent to the US, 24 per cent to Asia and the rest to other European funds. Some 65 per cent of the debt was sold to asset managers, 15 per cent to lenders, 12 per cent to central banks and 8 per cent to insurance and pension funds.

The country has sold 249 trillion rupiah of debt in the first half of 2014, or 58 per cent of a record gross issuance target of 423.7 trillion rupiah, according to data compiled by Bloomberg.

The finance ministry aimed to “frontload” bond sales in the first half to secure funding needs before the election, Robert Pakpahan, director general at the debt management office in Jakarta, said in January. The nation intends to sell global Islamic bonds this year and is also considering a yen-denominated offer, he has said in the last two months.

The country’s global bonds have returned 10.3 per cent this year, the best performance after Pakistan among 12 Asian emerging market indexes compiled by HSBC Holdings Plc.

Sovereign debt from Southeast Asia’s largest economy is rated at the lowest investment grade by Fitch Ratings and Moody’s, while Standard & Poor’s has kept it at the highest junk level. Fitch reaffirmed its rating in a statement yesterday, saying it assumes an orderly presidential election next week when Indonesians head to polls to choose between non-active Jakarta Governor Joko Widodo and former army general Prabowo Subianto.

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Reading Time: 2 minutes

Indonesia’s debut sale of euro bonds attracted bids for almost seven times the 1 billion euros ($1.4 billion) sold, as the country took advantage of lower borrowing costs in Europe.

Reading Time: 2 minutes

Euro-bondsIndonesia’s debut sale of euro bonds attracted bids for almost seven times the 1 billion euros ($1.4 billion) sold, as the country took advantage of lower borrowing costs in Europe.

The nation issued the seven-year notes at 2.976 per cent, or 195 basis points above the euro mid-swap rate, the finance ministry said in an e-mailed statement today. That compares with the 4.032  secondary-market yield on Indonesia’s similar-maturity sovereign dollar securities, data compiled by Bloomberg show. The sale attracted 6.7 billion euros of bids, the ministry said in the statement.

Indonesia, which holds a presidential election on July 9, needs to sell a record amount of debt this year to fund a fiscal deficit target of 2.4 percent of gross domestic product, which was increased from 1.69 per cent last month. The European Central Bank cut its benchmark interest rate to a record-low 0.15 per cent on June 5 and introduced negative deposit rates. The euro sale was aimed at reducing reliance on dollar bonds as the US cuts stimulus, Indonesian authorities said in January.

“Indonesia successfully opened a new market for itself,” Yudistira Slamet, head of fixed-income research at PT Danareksa Sekuritas, one of the selling agents, said in interview in Jakarta today. “Indonesia locked in a relatively low yield, compared with its existing bonds, while European investors won an attractive rate.”

“It’s smart of Indonesia to tap the euro market now as the ECB’s easing bodes well for demand,” Ezra Nazula, head of fixed income at PT Manulife Aset Manajemen Indonesia in Jakarta, who oversees about 24 trillion rupiah ($2 billion) of assets, said yesterday. “The trend for dollar yields is up, while euro yields should remain low. This is the government’s way of responding to this.”

Indonesia sold 24 per cent of the euro bonds to investors in the UK, 19 per cent to those in Germany and Austria, 4 per cent to Switzerland, 18 per cent to the US, 24 per cent to Asia and the rest to other European funds. Some 65 per cent of the debt was sold to asset managers, 15 per cent to lenders, 12 per cent to central banks and 8 per cent to insurance and pension funds.

The country has sold 249 trillion rupiah of debt in the first half of 2014, or 58 per cent of a record gross issuance target of 423.7 trillion rupiah, according to data compiled by Bloomberg.

The finance ministry aimed to “frontload” bond sales in the first half to secure funding needs before the election, Robert Pakpahan, director general at the debt management office in Jakarta, said in January. The nation intends to sell global Islamic bonds this year and is also considering a yen-denominated offer, he has said in the last two months.

The country’s global bonds have returned 10.3 per cent this year, the best performance after Pakistan among 12 Asian emerging market indexes compiled by HSBC Holdings Plc.

Sovereign debt from Southeast Asia’s largest economy is rated at the lowest investment grade by Fitch Ratings and Moody’s, while Standard & Poor’s has kept it at the highest junk level. Fitch reaffirmed its rating in a statement yesterday, saying it assumes an orderly presidential election next week when Indonesians head to polls to choose between non-active Jakarta Governor Joko Widodo and former army general Prabowo Subianto.

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