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The government swapped Rp 2.36 trillion (US$ 256 million) of
treasury bonds maturing between 2007 and 2009 for new ones due in 2021
as part of an effort to restructure the country's outstanding bond debt.
A total of Rp 2.6 trillion in bids were received from bondholders
during Tuesday's open auction for the bond swap, the Finance Ministry's
director general of the treasury, Mulia P. Nasution, said in a
statement.
Investors traded in nine series of fixed-rate and variable-rate bonds,
carrying average weighted yields of between 9.5 and 14 percent, for the
new 15-year, fixed-rate FR0034 bonds, with an average weighted yield of
12.4 percent.
The government has been refinancing its maturing bonds both by
extending their terms through such bond swaps, and buying them back so
as to better manage redemption. It would face the risk of having to pay
as much as Rp 40 trillion in due bonds between 2007 and 2009 if they
were not refinanced.
The government is tending to increasingly rely on bonds to finance the
budget, instead of resorting to more politically-sensitive overseas
borrowing or privatization. In all, it hopes to raise Rp 35.8 trillion
in net proceeds from bond sales this year to help plug the budget
deficit, which is expected to come in at Rp 37.6 trillion, or 1.2
percent of gross domestic product.
Finance Minister Sri Mulyani Indrawati has said that the government
will increase its usual monthly bond sales to Rp 5 trillion from Rp 3
trillion previously.
In its last local-currency bond auction earlier this month, the
government managed to take in Rp 5.62 trillion in proceeds, about the
same amount as in June. Meanwhile, it raised US$2 billion in March from
its global bond sale for this year.
The government will hold its next local-currency bond sale on Aug. 22.
Before that, on Aug. 9, it will hold an auction for Indonesia's
first-ever retail bonds, targeting some Rp 2 trillion in proceeds.
These bonds are specially targeted at retail investors.
Global credit rating agencies Standard and Poor's, Moody's Investment
Services and Fitch Ratings all rate Indonesian bonds as junk, or still
below investment grade. However, investors are attracted by the high
yields on the bonds of at least 12 percent, one of the highest levels
among the world's emerging markets.
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