Indonesia plans to sell $4 billion of 10- and thirty-year dollar-denominated bonds at yields exceeding the rates investors demand to hold its existing securities with similar maturities.
Southeast Asia’s biggest economy is offering $2 billion of 10-year notes to yield 5.95 percent and $2 billion of 30-year debentures to yield 5.95 percent, according to people familiar with the matter who asked not to be identified because the matter is private. The nation’s existing bonds sold in April and due in 2023 and 2043 are yielding 5.74 percent and 6.41 percent respectively, Bloomberg-compiled prices show.
Indonesia is grappling with a currency that plunged 21 percent last year, the biggest loss in more than a decade, as foreign reserves stayed below $100 billion for a sixth month through November. Record trade and current-account deficits last year prompted Bank Indonesia to raise its benchmark by 1.75 percentage points since early June, an aggressive rate tightening which worked to slow the economy and reduce imports.
“The yields offered are very attractive compared with rates on the secondary market,” said Ezra Nazula, the head of fixed-income at PT Manulife Asset Management, which oversees about $3.8 billion. “Global yields are set to climb from here on out so the sooner they issue, the better.”
Robert Pakpahan, director general at the debt management office of Indonesia’s finance ministry, declined to comment on the bond sale plans today.
Indonesia is seeking to raise a record 357.96 trillion rupiah ($29.2 billion) from both international and local debt capital markets this year, the debt management office said in a statement today. Of that, some 6.55 trillion rupiah will be procured via loans, according to the statement.
Dollar borrowing costs for Indonesian issuers rose to 6.38 percent yesterday, the highest in almost a month, according to JPMorgan Chase & Co. indexes. Benchmark U.S. 10-year Treasury yields climbed by the most last year since 2009 as the economy improved enough for the Federal Reserve to start reducing its bond purchases, prompting some money managers to bet stimulus which has buoyed emerging-market assets will end within 12 months.
Indonesia has $1.3 billion of dollar notes coming due in March and a further $1 billion maturing in May, data compiled by Bloomberg show. Its sale may be a precursor to other sovereigns in the region.
The Philippines, which has sold dollar bonds in January for seven out of the last 10 years, met with fixed-income investors last month. Sri Lanka meanwhile sold $1 billion of five-year bonds at a 6 percent yield yesterday, the data show.
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