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The government will offer next week Rp 1 trillion (US$108
million) in local currency bonds, the last this year, to help finance
the budget deficit.
It also plans to hold a bond-swap auction later this month, the Finance
Ministry Director General for the Treasury, Mulia P. Nasution, said
Wednesday, to help reduce the costs of existing bonds.
The bonds up for offer on Oct. 10 will be the two-year, fixed-rate
FR0041 bond series, maturing on Nov. 15, 2008.
Mulia said the monthly bond sale will most likely be the last, with the
government having issued enough bonds for this year.
The government will however continue offering to investors the
opportunity to exchange their existing bond holdings with those of
longer maturity, or bond swap, he added.
The next bond swap is planned to be held on Oct. 17, the Finance
Ministry's director for debt management, Rahmat Waluyanto, said.
With the swapped bonds carrying lower yet still attractive yields for
investors, the government can save on both their interest and due
payments, lowering the costs of funding its existing bonds reaching
some Rp 40 trillion between 2007 and 2009.
The government now plans to raise Rp 35.8 trillion in net bond sale
proceeds this year, from a previous Rp 24.9 trillion, to help finance
the budget deficit, which has also been revised upwards to Rp 40
trillion, or 1.3 percent of the gross domestic product.
It has so far issued Rp 41.46 trillion in rupiah-denominated bonds,
including Rp 3.28 trillion of Indonesia's first retail bonds series for
individual investors in August. The government had in March also issued
$2 billion in global bonds.
Meanwhile, it has so far switched bonds worth a total of Rp 19.68
trillion. The government had said it will hold no bond buybacks this
year.
Indonesian bonds are still rated as below investment grade by global
rating agencies, but investors continue to eye their high yield
offerings.
The central bank may further cut its key rate from its current level of
11.25 percent with inflation continuing to ease.
Analysts are predicting Bank Indonesia will lower the rate another half
percentage point during its next policy meeting this Thursday.
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