Indonesia joins Asia dollar bond rush with sovereign deal
06/09/2022 (The Malaysian Reserve) - INDONESIA marketed a benchmark-sized dollar bond, joining a flurry of activity in Asia as issuers took advantage of a letup in borrowing costs.
The offer features three tenors, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about the matter. Yields on the sovereign’s existing dollar bonds rose across the curve on news of the transaction.
Issuers across Asia have been stung by a strong dollar and a record credit rout this year, making the US-currency offering by Southeast Asia’s largest economy a rarity. Indonesia’s government said earlier this year it would be “extra careful” in issuing bonds offshore to avoid locking in a high financing burden.
But spreads on dollar bonds narrowed by the most in two years in August, offering sellers a window of opportunity. With companies that produce everything from palm oil to coal, Indonesian assets have attracted international funds, and the stock index is near a record.
Proceeds of the bond sale will be used to repurchase outstanding debt as well as for government expenditure, which has risen due to higher energy subsidies.
Seeking to balance the risk of inflationary pressures against a ballooning subsidies bill, the government recently raised some fuel prices.
Prior to Tuesday’s offering, the Indonesian government last raised dollars in May via a sukuk sale. The sole corporate US-currency borrower was PT Freeport Indonesia, which sold notes worth $3 billion, according to data compiled by Bloomberg.
Those figures also show that although the volume of dollar bonds by Indonesian firms has plunged this year, sales in rupiah almost doubled. –BLOOMBERG