According to documents and a government statement, Indonesia has raised $1.84 billion via the sale of bonds denominated in US dollars and euros, with a portion of the profits going toward repurchasing outstanding dollar bonds.
Analysts believe the buyback offer is the first of its kind by a Southeast Asian country for dollar bonds, and it could be used to manage liquidity ahead of US tapering.
According to term sheets reviewed by Reuters, Indonesia issued $600 million in 10-year notes with a 2.18 percent yield and $625 million in its first sale of 40-year bonds with a 3.28 percent rate.
The funds will be used to fund a tender offer for eight existing bonds with maturities ranging from 2022 to 2026 that will run until Friday.
The repurchase offer appears to be an attempt to “reprofile its obligations to decrease refinancing risks with longer-tenor notes that lock at a presently very low yield,” according to Handy Yunianto, a fixed income analyst at Mandiri Sekuritas.
He added that the offering prices were set in accordance with market prices, and that the tactic could be linked to anticipation of higher interest rates as the US Federal Reserve continues to reduce asset purchases made during the recession.
The administration has been silent on the sale of dollar bonds.
Indonesia’s debt department said in a statement on Tuesday that it has generated 500 million euros ($590.7 million) in its first offering of euro-denominated notes to fund its efforts to achieve sustainable development goals.
The euro notes, which have a 12-year maturity and a 1.351 percent rate, are among Asia’s first SDG bonds, according to the ministry, which did not disclose the amount of the order book.
According to a source with firsthand information, the order book for the 10-year dollar bonds was worth $2 billion, and the order book for the 40-year dollar bonds was worth $1.2 billion.
Due to a surge in spending to deal with the impact of the COVID-19 pandemic, Indonesia’s fiscal deficit has worsened dramatically since last year. Its central bank has been buying government bonds directly to help curb the rise in interest costs for years to come.
($1 = 0.8465 euros)
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