Indonesia Government to Start Sale of 10-Year Dollar Bonds, Investors Say

Indonesia plans to start a benchmark-sized sale of 10-year dollar bonds today or tomorrow, according to three investors informed of the issuance, who asked not to be identified before a public announcement.

Bambang Brodjonegoro, the Finance Ministry’s head of fiscal policy, said in Jakarta today Indonesia may sell global bonds in the “near future,” without elaborating. Indonesia may sell the debt at 5.125 percent, according to three other investors that were informed of the issuance.

Developing-nation debt offerings are off to a record start after near-zero global interest rates and the Federal Reserve’s quantitative easing fueled the biggest investor flows to emerging-market bonds on record in 2010, based on data from EPFR Global. Issuance of international debt from emerging markets climbed 8 percent this year to $256 billion from a year earlier, according to data compiled by Bloomberg. Indonesia had a budget deficit of 0.6 percent of gross domestic product in 2010.

“There’s a lot of emerging-market, dollar-denominated funds that will be interested in participating,” said Rajeev de Mello, who helps oversee $454 billion as head of Asian investment in Singapore at Western Asset Management Co., the Pasadena, California-based fixed-income unit of Legg Mason Inc.

“Indonesia is a country that a lot of people like. The total debt to GDP is low. There’s not that many Asian dollar- denominated bonds anymore in the sovereign space” that will be issued this year, he said.

The yield on Indonesia’s 5.875 percent U.S. currency bond due March 2020 fell two basis points, or 0.02 percentage point, to 4.84 percent as of 5:16 p.m. in Jakarta, according to prices from Royal Bank of Scotland Group Plc. The yield climbed 25 basis points this year.

Spread Narrows

The last 10-year dollar bonds were sold in January 2010 at a 228 basis point yield premium over U.S. Treasuries, according to Bloomberg data. The spread has since narrowed to 169 basis points. Indonesia sold $2 billion of the debt, and received orders for 2.3 times the amount on offer. The Philippines sold $1.5 billion of 15-year dollar securities in March.

The dollar debt of Southeast Asia’s largest economy has returned 7.4 percent over the past year, indexes compiled by HSBC Holdings Plc show. Indonesia is giving the fourth-best returns among the 11 Asian nation indexes tracked after the Philippines, Thailand and China.

Southeast Asia’s largest economy raised almost $3 billion from global bonds last year, including the $2 billion of dollar notes and 60 billion yen ($734 million) of samurai debt denominated in Japan’s currency. The amount sold was lower than the $4 billion in 2009.

Rating Upgrade

The country may issue dollar-denominated Islamic debt in the second half, Jakarta-based Dahlan Siamat, director of Islamic finance at the finance ministry, said in an interview yesterday.

Standard & Poor’s boosted Indonesia’s sovereign credit rating to BB+ this month with a positive outlook, while Moody’s Investors Service raised its ranking to Ba1 on Jan. 17, citing the nation’s “economic resilience” and improving debt position. Fitch Ratings assessed Indonesia at BB+. All three ratings agencies rank the country one level below investment grade.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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