Indonesia $2.5 Billion Dollar Sukuk 3.1 Times Oversubscribed

  • One of most-frequent issuers with sixth straight annual sale
  • Sold $2 billion in 2015 and got orders for 3.4 times offer

Indonesia raised $2.5 billion from its sale of dollar Islamic bonds and got orders for 3.1 times the amount offered, according to a person familiar with the issuance.

The Southeast Asian nation sold $750 million of five-year sukuk and $1.75 billion of 10-year notes priced at 3.4 percent and 4.55 percent, respectively, said the person, who isn’t authorized to speak publicly and declined to be identified. Bids totaled $7.7 billion. Indonesia sold $2 billion of such debt due in 2025 at its previous offering last year at a coupon rate of 4.325 percent and received orders for $6.8 billion, or 3.4 times the offer.

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The Southeast Asian nation’s bonds have attracted more than $3 billion of inflows this quarter as the Federal Reserve said it’s only likely to raise interest rates twice in 2016 instead of the four previously envisaged, helping retain Indonesia’s yield advantage over U.S. debt. The rupiah is also turning into a regional top performer after a more than 10 percent slump in 2015 that pushed it beyond 14,000 a dollar for the first time since the Asian financial crisis. 

“Indonesia timed its sukuk issuance to perfection as it comes after the dovish Fed’s statement," said Hasif Murad, an investment manager at Kuala Lumpur-based Aberdeen Islamic Asset Management, whose parent company oversees the equivalent of $2.9 billion.“The fact that Indonesia is the darling of Asia also helps.”

A Bloomberg index of emerging-market dollar bonds has climbed 5.5 percent this quarter, set for the biggest three-month gain since September 2012. And with Malaysia said to be planning another global sukuk, the outlook for Islamic note sales worldwide is already looking brighter than last year.

Issuance to date is $10.2 billion, exceeding last quarter’s $9.9 billion, based on Bloomberg-compiled data. Total offerings for all of 2015 dropped 29 percent to $35.4 billion in the poorest showing since 2010.

The yield on Indonesia’s 2025 Islamic bonds issued last year rose one basis point to 4.41 percent as of 11:39 a.m. in Jakarta, less than the 4.95 percent they were paying at the end of last year, data compiled by Bloomberg show. There’s no pricing available yet for either of the two new notes. The rupiah has appreciated 4.7 percent versus the dollar in 2016, second only to a 6.6 percent gain in Malaysia’s ringgit among Southeast Asia’s most-traded currencies.

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