Govt Plans Debt Auction for Tuesday, the First Since Fitch?s Upgrade
Francezka Nangoy | January 06, 2012
Indonesia?s Finance Ministry aims to raise Rp 7 trillion ($770 million) by selling bills and bonds next week, it said in a statement on Thursday.
The debt auction, scheduled for Tuesday, will be the first sale of such notes this year and the first since Fitch Ratings raised the nation?s credit rating on Dec. 15 to investment level.
?The proceeds will be used to help cover the budget deficit,?? ministry spokesman Yudi Pramudi said in the statement.
The ministry said on Monday that it wanted to raise Rp 53.2 trillion in debt sales in the first quarter of the year, or 12 percent more than the Rp 42.75 trillion it sold in the same period in 2011.
The government plans to sell bills maturing on April 11 this year and on Jan. 11 next year, the statement said.
It also plans to sell 6.25 percent bonds due in April 2017; 7 percent notes maturing in May 2022; and 8.25 percent notes due in June 2032.
The government did not set the indicative size for each maturity ? the size of the bonds will depend on the market demand at the auction date.
Indonesia has sold rupiah- and dollar-denominated bonds in the past few years to cover its budget deficit. The government forecast its state budget shortfall this year to hit Rp 123.6 trillion, 1.5 percent of gross domestic product.
Last year, Indonesia posted a budget deficit-to-GDP ratio of 1.27 percent, which amounted to Rp?90.1 trillion, Finance Minister Agus Martowardojo said on Thursday.
Wiling Bolung, the head of treasury at ANZ Panin Bank in Jakarta, said the sale would test investor demand for Indonesian debt following the Fitch upgrade. The rating increase will likely encourage international and local investors to buy the nation?s bonds, he said.
?Of course the auction will be successful,? he said. ?Demand for Indonesian debt is still big and the rupiah is also very liquid in the market.?
Fitch raised the long-term and local currency debt rating one notch to its lowest investment grade, BBB-, after Standard & Poor?s and Moody?s Investors Service raised the debt rating to a step below investment grade last year.
The nation had lost its investment grade in 1997, the start of the Asian financial crisis.
Rahmat Waluyanto, director general of the ministry?s debt management office, said in mid-December that the nation will benefit from cheaper financing costs after Fitch?s upgrade.
The yield on government five-year bonds was 5.36 percent on Friday, little changed from 5.30 percent the previous day, while the yield on 10-year notes rose to 6.12 percent from 6.02 percent, according to the Indonesia Bond Pricing Agency. A bond?s yield moves inversely to price.
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